In eight years, Shu Company plans to receive $11,000 cash from the sale of a machine that has a $16,000 book value.YearFV of $1 at 12% FV of an ordinary annuity at 12% PV of $1 at 12% PV of an ordinary annuity at 12%1 1.120 1.000 0.893 0.893 2 1.254 2.120 0.797 1.690 3 1.405 3.374 0.712 2.402 4 1.574 4.779 0.636 3.037 5 1.762 6.353 0.567 3.605 6 1.974 8.115 0.507 4.111 If the firm is subject to a 30% income tax rate and has a 12% after-tax hurdle rate, the correct discounted net cash flow would be:
A. $3,838.
B. $606.
C. $5,050.
D. $1,414.
E. None of the answers is correct.
Answer: C
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