Mester Corporation has provided the following information concerning a capital budgeting project: After-tax discount rate 15?%Tax rate 30?%Expected life of the project 4? Investment required in equipment$100,000? Salvage value of equipment$0? Annual sales$205,000? Annual cash operating expenses$140,000? One-time renovation expense in year 3$25,000? Use Exhibit 13B-1 above to determine the appropriate discount factor(s). 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 project is closest to: (Round intermediate calculations and final answer to the nearest dollar amount.)
A. $39,853
B. $139,853
C. $41,956
D. $94,500
Answer: A
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