Planas Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 14%. 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.
Use Exhibit 7B-1, to determine the appropriate discount factor(s) using the tables provided.
The net present value of the entire project is closest to:
A) $59,824
B) $91,000
C) $45,649
D) $130,000

Question

Planas Corporation has provided the following information concerning a capital budgeting project:  The company's income tax rate is 30% and its after-tax discount rate is 14%. 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.
Use Exhibit 7B-1, to determine the appropriate discount factor(s) using the tables provided.
The net present value of the entire project is closest to:
A) $59,824 
B) $91,000 
C) $45,649 
D) $130,000

Quizplus · Accepted Answer

Depreciation expense = (Original cost − Salvage value) ÷ Useful life
= ($80,000 − $0) ÷ 4 years = $20,000 per year 11eacbfc_c820_c7e0_8ffe_3fd25a29c9ed_TB7552_00

Planas Corporation Has Provided the Following Information Concerning a Capital