Rhoads Corporation Is Considering a Capital Budgeting Project That Would

question 25

Multiple Choice

Rhoads Corporation is considering a capital budgeting project that would require an investment of $160,000 in equipment with a 4-year expected life and zero salvage value. Annual incremental sales will be $460,000 and annual incremental cash operating expenses will be $330,000. The company's income tax rate is 30% and the after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment; the annual depreciation expense will be $40,000. 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 table.
The net present value of the project is closest to:

• A) $178,252
• B) $252,000
• C) $97,040
• D) $134,168

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A labor union that is the sole representative of all the employees in a business or organization, having the right to negotiate on their behalf.

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A significant labor organization in the late 19th century U.S. that advocated for broad social reforms, including the eight-hour workday, and welcomed all laborers.

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