Mota Corporation has provided the following information concerning a capital budgeting project: The expected life of the project and the equipment is 3 years and the equipment has zero salvage value. 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 and the depreciation expense on the equipment would be $210,000 per year. 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 income tax rate is 35%. The after-tax discount rate is 15%. The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.
Required:
Determine the net present value of the project. Show your work!

Question

Mota Corporation has provided the following information concerning a capital budgeting project:  The expected life of the project and the equipment is 3 years and the equipment has zero salvage value. 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 and the depreciation expense on the equipment would be $210,000 per year. 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 income tax rate is 35%. The after-tax discount rate is 15%. The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.
Required:
Determine the net present value of the project. Show your work!

Quizplus · Accepted Answer

The Answer of Mota Corporation has provided the following information concerning a capital budgeting project:  The expected life of the project and the equipment is 3 years and the equipment has zero salvage value. 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 and the depreciation expense on the equipment would be $210,000 per year. 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 income tax rate is 35%. The after-tax discount rate is 15%. The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.
Required:
Determine the net present value of the project. Show your work!

Mota Corporation Has Provided the Following Information Concerning a Capital