What Is the After-Tax Net Present Value of a Project

question 64

Essay

What is the after-tax net present value of a project costing $600,000 that Plud Corporation can invest in if the project has the following estimated revenues and expenses?
$\begin{array}{ll}&\text { Initial cost }&\$600,000\\\text { Year } 1&\text { Revenue } & 2,000,000 \\&\text { Expenses } & 1,450,000 \\\text { Year } 2&\text { Revenue } & 1,800,000 \\&\text { Expenses } & 1,250,000\end{array}$ Plud uses an 8 percent discount rate for evaluation and expects a 34 percent marginal tax rate in the relevant years.