(Appendix 8C)Erling Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%.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)$331, 080
B)$172, 738
C)$377, 000
D)$184, 178

Question

(Appendix 8C)Erling Corporation has provided the following information concerning a capital budgeting project:  The company's income tax rate is 35% and its after-tax discount rate is 15%.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)$331, 080 
B)$172, 738 
C)$377, 000 
D)$184, 178

Quizplus · Accepted Answer

Depreciation expense = (Original cost - Salvage value)÷ Useful life
= ($280, 000 - $0)÷ 4 years = $70, 000 per year
 11eaa0c8_96cc_aa12_9cb2_2bfb597ac138_TB2487_00

(Appendix 8C)Erling Corporation Has Provided the Following Information Concerning a Capital