Use the Following Information to Answer the Question(s)below

question 41

Multiple Choice

Use the following information to answer the question(s) below.
(Include the MACRS Table from the Appendix. )
Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of $540,000.These tractors are expected to generate EBITDA of $250,000 for each of the next three years.Casa Grande Farms has a 21% tax rate and has a cost of capital of 10%.
-Assuming that Casa Grande Farms depreciates these tractors straight line over the three-year life,then the NPV of buying the tractors is closest to:

• A)$45,156.
• B)$36,225.
• C)$81,715.
• D)$513,235.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with fixed dividends.

Annual Return

The percentage change in the value of an investment over a one-year period, including dividends, interest, and capital gains.

Supernal Growth

refers to extraordinary or exceptional growth in a business or economic sector.

Dividend

A share of a firm's income allocated to its stockholders, often in cash or extra shares.