A Company Is Planning to Invest in a Project, Which

question 88

Multiple Choice

A company is planning to invest in a project, which requires the purchase of capital assets of $200,000 and additional net working capital of $20,000.The assets have a five-year life, a CCA rate of 30%, and an expected salvage value of $35,000.The annual costs for the project's operations are $50,000.The company's effective tax rate is 40% and the cost of capital is 12%.Assume the asset class remains open after the assets are sold and the half-year rule applies in the first year.What is the break-even pre-tax annual operating revenue?

• A)$114,907
• B)$38,944
• C)$64,907
• D)$140,384