(Appendix 13C) Mulford 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 12%. 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 net present value of the entire project is closest to:
A) $50,380
B) $14,590
C) $27,310
D) $70,000

Question

(Appendix 13C) Mulford 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 12%. 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 net present value of the entire project is closest to:
A) $50,380 
B) $14,590 
C) $27,310 
D) $70,000

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value) ÷ Useful life
= ($80,000 - $0) ÷ 4 years = $20,000 per year
 11ea7761_15df_4c1f_81a5_f3a5f964b49b_TB2580_00

(Appendix 13C) Mulford Corporation Has Provided the Following Information Concerning