Year 0 Revenues Cost of Goods Sold = EBIT - Taxes (35%) = Unlevered net...
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Year 0 Revenues Cost of Goods Sold = EBIT - Taxes (35%) = Unlevered net income - Additions to Net Working Capital - Capital Expenditures = Free Cash Fow Year 1 400,000 - 140,000 260,000 - 91,000 169,000 Year 2 400,000 - 140,000 260,000 - 91.000 169,000 - 11,000 Year 3 400,000 - 140,000 260,000 - 91.000 169,000 - 11,000 - 11,000 - 300,000 158,000 158,000 158,000 Visby Rides, a livery car company, is considering buying some new luxury cars. After extensive research, they come up with the above estimates of free cash flow from this project. The cars belong to asset class 10 and have a capital cost allowance (CCA) rate of 30%. The cars will be sold at the end of 3 years for $150,000. What is the present value of the lost CCA tax shields of the project, given that the cost of capital is 10%, and the company faces a marginal tax rate of 25%? O A. $28,125 O B. $8342 O C. $25,912 OD. $21,131 O E. $10,112
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