Layer Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment$160,000 Expected life of the project 4 Salvage value of equipment$0 Annual sales$360,000 Annual cash operating expenses$290,000 Working capital requirement$20,000 One-time renovation expense in year 3$20,000 The company's income tax rate is 30% and its after-tax discount rate is 8%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. 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 total cash flow net of income
taxes in year 3 is:
A. $61,000
B. $50,000
C. $41,000
D. $47,000
Answer: D
You might also like to view...
To most stockholders, the main advantages of common stock investments are:
A. attractive returns and active trading. B. guaranteed returns and voting rights. C. a high interest payment and active trading. D. high risk and guaranteed returns. E. low risk and guaranteed returns.
What are family-friendly benefits? Explain the common types of family-friendly benefits.
What will be an ideal response?
Explain the term “Machiavellianism” and explain what low scores and high scores mean on that “scale.”
What will be an ideal response?
Defenders of the market-based approach to resolving environmental challenges contend that environmental problems are ________ problems.
Fill in the blank(s) with the appropriate word(s).