Bugs Buster Is Considering Investing in a Risky New Project

question 107

Multiple Choice

Bugs Buster is considering investing in a risky new project that requires $100,000 for the purchase of new equipment and $20,000 for additional net working capital.The equipment has a five-year life and a CCA rate of 30%.The equipment is expected to sell for $8,500 at the end of the project.Assume the asset class remains open after the asset is sold.The firm's cost of capital is 12% and marginal tax rate is 35%.The risk premium for the project is 3%.What is the present value of the terminal after-tax cash flow (ECF_n) ?

• A)$14,169.54
• B)$16,171.67
• C)$16,241.76
• D)$18,536.69

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Definitions:

Active Memory

Also known as RAM (Random Access Memory), it is the part of a computer that is used by the operating system, software, and currently active processes for storing data temporarily.

Network

A connected group of computers and devices that can exchange data and share resources.

Replicates

Copies or reproductions of an original item or experiment, often used for verification or testing purposes.

Wireless Network

A network that connects devices to the Internet and to each other without the use of cables, using radio waves or infrared signals.