Question

Truskowski Corporation has provided the following information concerning a capital budgeting project:

After-tax discount rate | 7 | % | |

Tax rate | 30 | % | |

Expected life of the project | 4 | ||

Investment required in equipment | $ | 192,000 | |

Salvage value of equipment | $ | 0 | |

Annual sales | $ | 390,000 | |

Annual cash operating expenses | $ | 265,000 | |

The company uses straight-line depreciation on all equipment; the annual depreciation expense will be $48,000. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.

Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using table.

The net present value of the project is closest to:

Answer #1

Truskowski Corporation has provided the following information
concerning a capital budgeting project:
After-tax discount rate
11
%
Tax rate
30
%
Expected life of the project
4
Investment required in equipment
$
160,000
Salvage value of equipment
$
0
Annual sales
$
350,000
Annual cash operating expenses
$
245,000
The company uses straight-line depreciation on all equipment;
the annual depreciation expense will be $40,000. Assume cash flows
occur at the end of the year except for the initial investments.
The...

Rapozo Corporation has provided the following information
concerning a capital budgeting project:
Investment required in equipment
$
492,000
Net annual operating cash inflow
$
248,000
Tax rate
30
%
After-tax discount rate
7
%
The expected life of the project and the equipment is 3 years
and the equipment has zero salvage value. The company uses
straight-line depreciation on all equipment and the depreciation
expense on the equipment would be $164,000 per year. Assume cash
flows occur at the end...

Stockinger Corporation has provided the following information
concerning a capital budgeting project:
Investment required in equipment $ 314,000
Expected life of the project 4
Salvage value of equipment $ 0
Annual sales $ 665,000
Annual cash operating expenses $ 471,000
Working capital requirement $ 30,000
One-time renovation expense in year 3 $ 97,000
The company’s income tax rate is 30% and its after-tax
discount rate is 11%. The working capital would be required
immediately and would be released for use...

Bonomo Corporation has provided the following information
concerning a capital budgeting project:
Tax rate
30
%
Expected life of the project
4
Investment required in equipment
$
66,000
Salvage value of equipment
$
0
Annual sales
$
255,000
Annual cash operating expenses
$
178,500
One-time renovation expense in year 3
$
26,000
The company uses straight-line depreciation on all
equipment.
The income tax expense in year 3 is:
Garrison 16e updates 05-17-2018, 06-15-2018
Multiple Choice
$9,900
$7,800
$4,950
$10,200

Moates Corporation has provided the following data concerning an
investment project that it is considering:
Initial investment
$
210,000
Annual cash flow
$
126,000
per year
Expected life of the project
4
years
Discount rate
9
%
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine
the appropriate discount factor(s) using the tables provided.
The net present value of the project is closest to:
(Round your intermediate calculations and final answer to
the nearest whole dollar amount.)
Multiple...

Joetz Corporation has gathered the following data on a proposed
investment project (Ignore income taxes.):
Investment required
in equipment
$
30,000
Annual cash inflows
$
6,000
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses straight-line depreciation on all equipment.
Assume cash flows occur uniformly throughout a year except for the
initial investment.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine
the appropriate discount factor(s)...

Juliar Inc. has provided the following data concerning a
proposed investment project: (Ignore income taxes.) Initial
investment $ 310,000 Life of the project 11 years Annual net cash
inflows $ 48,000 Salvage value $ 38,000 The company uses a discount
rate of 9%.
Click here to view Exhibit 13B-1 and Exhibit 13B-2 to determine
the appropriate discount factor(s) using tables.
Required: Compute the net present value of the project.
(Negative amount should be indicated by a minus sign. Round
discount...

1.Coache Corporation is considering a capital budgeting project
that would require an investment of $350,000 in equipment with a 4
year useful life and zero salvage value. The annual incremental
sales would be $690,000 and the annual incremental cash operating
expenses would be $470,000. In addition, there would be a one-time
renovation expense in year 3 of $42,000. The company’s income tax
rate is 30%. The company uses straight-line depreciation on all
equipment.
The total cash flow net of income...

Gaston Company is
considering a capital budgeting project that would require a
$2,700,000 investment in equipment with a useful life of five years
and no salvage value. The company’s tax rate is 30% and its
after-tax cost of capital is 13%. It uses the straight-line
depreciation method for financial reporting and tax purposes. The
project would provide net operating income each year for five years
as follows:
Sales
$
3,100,000
Variable
expenses
1,510,000
Contribution
margin
1,590,000
Fixed
expenses:
Advertising,
salaries,...

Lander Company has an opportunity to pursue a capital budgeting
project with a five-year time horizon. After careful study, Lander
estimated the following costs and revenues for the project: Cost of
equipment needed $ 250,000 Working capital needed $ 62,000 Overhaul
of the equipment in two years $ 19,000 Annual revenues and costs:
Sales revenues $ 370,000 Variable expenses $ 190,000 Fixed
out-of-pocket operating costs $ 84,000 The piece of equipment
mentioned above has a useful life of five years...

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