Rhoads Corporation is considering a capital budgeting project that would require an investment of $160,000 in equipment with a 4-year expected life and zero salvage value. Annual incremental sales will be $460,000 and annual incremental cash operating expenses will be $330,000. The company's income tax rate is 30% and the after-tax discount rate is 15%. 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 company takes income taxes into account in its capital budgeting.See separate Exhibit 13B-1 to determine the appropriate discount factor(s) using table. The net present value of the project is closest to:
A. $134,168
B. $97,040
C. $178,252
D. $252,000
Answer: A
You might also like to view...
Which of the following is a benefit of a successful team?
A) Diversity of views B) Groupthink C) Multiple agendas D) Low cost E) Limited peer pressure
When management of an organization decides to measure the organization's marketing activities, management is necessarily also committing to which of the following?
A) using copy testing B) using an advertising report card C) moving from a customer relationship model to a transactional model D) relating marketing activities to specific marketing objectives E) purchasing a CRM program
A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $21 Unit manufacturing costs: Variable 12 Fixed 5 What is the differential revenue from the acceptance of the offer?
A) $300,000 B) $420,000 C) $120,000 D) $240,000
Triad Systems is a maker of computer peripherals. The firm's compact disc (CD) drive brand
was once the highly sought after for its durability and low costs. However, with the introduction of flash drives and other faster memory storage technologies, the CD drive market has declined and almost all of Triad's competitors in the market have discontinued production of CD drives. Triad Systems is possibly the lone seller of CD drives today. However, considering the fact that most of the support software for technological products such as mobile phones and operating systems are distributed in CD form, there are still users who buy CD drives. Which of the following strategies would prove most advantageous to Triad Systems? A) Triad should discontinue distribution through low value-added channels such as mail order and telephone sales. B) Triad should adopt an intensive distribution strategy involving multiple channels to boost sales of the declining product. C) Triad should raise prices of the CD drives as there is no acceptable substitute to its product in the market. D) Triad should develop product variants, such as CD drives with USB slots, to extend the life cycle of the product.