Reye Corporation Has Provided the Following Information Concerning a Capital

question 81

Multiple Choice

Reye 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 9%. 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.
Use Exhibit 7B-1 to determine the appropriate discount factor(s) using table.
The net present value of the entire project is closest to:

• A) $92,148
• B) $150,450
• C) $77,988
• D) $168,000

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Definitions:

Ngo Dinh Diem

The first President of South Vietnam, serving from 1955 until his assassination in 1963, known for his autocratic leadership and policies against communists.

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A branch of Christianity based in Vatican City, led by the Pope, and known for its traditions, doctrines, and global influence, with the largest number of adherents among Christian denominations.

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A guerrilla force that fought against South Vietnam and the United States during the Vietnam War, officially known as the National Liberation Front.