A Project Requires an Initial Investment of $200,000 and Expects

question 11

Multiple Choice

A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of $120,000 per year for two years .The corporate tax rate is 30 percent.The assets will depreciate using the MACRS 3-year schedule: (t = 1, 33%) ; (t = 2: 45%) ; (t = 3: 15%) ; (t = 4: 7%) .The company's tax situation is such that it can use all applicable tax shields.The opportunity cost of capital is 12 percent.Assume that the asset can sell for book value at the end of the project.Calculate the NPV of the project (approximately) .

• A)$22,463
• B)$19,315
• C)$16,244
• D)$5,721

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Definitions:

Wheel Depth

Measurement of the distance from the outer wheel surface to the mounting plate, important for fitting wheels to a vehicle correctly.

Radial Tires

Tires designed with the cords at a 90-degree angle to the travel direction, offering improved handling, wear, and fuel efficiency compared to bias-ply tires.

Circular Bands

Typically refers to components in machinery or engineering that have a round shape and serve as binding or connecting elements.

Air Pressure

The amount of force the air in a container such as a tire exerts against the inner surface area of the tire.