(Appendix 13C) Paletta 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 7%. 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) $298,250
B) $475,902
C) $195,902
D) $280,000

Question

(Appendix 13C) Paletta 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 7%. 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) $298,250 
B) $475,902 
C) $195,902 
D) $280,000

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value) ÷ Useful life
= ($280,000 - $0) ÷ 4 years = $70,000 per year
 11ea7761_15e0_d2c9_81a5_bd83e31d4717_TB2580_00

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