Paletta Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment$280,000 Expected life of the project 4 Salvage value of equipment$0 Annual sales$660,000 Annual cash operating expenses$470,000 One-time renovation expense in year 3$80,000 The company's income tax rate is 30% and its after-tax discount rate is 7%. The company uses straight-line depreciation on all equipment. 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.The net present value of the entire project is closest to:See separate Exhibit 13B-1, to determine the appropriate discount factor(s) using the tables provided.
A. $280,000
B. $475,902
C. $195,902
D. $298,250
Answer: C
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