Queue De Castor Foods Is Considering the Purchase of a New

question 82

Multiple Choice

Queue de Castor Foods is considering the purchase of a new capital asset for $35,000.The asset has an economic life of three years,a CCA rate of 20 percent,and expected salvage value of $5,000.The project also requires an investment in net working capital of $4,500.Assume the asset class remains open after the asset is sold.The firm's cost of capital is 14 percent and marginal tax rate is 40 percent.What is the present value of the terminal after-tax cash flow?

• A) $2,319.20
• B) $6,412.23
• C) $9,900.48
• D) $10,505.26

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Definitions:

Shareholders

Individuals or entities that own one or more shares of stock in a public or private corporation, giving them a proportion of ownership.

Leveraged Buyout

The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

Private Firm

A business whose shares are not offered to the public and is held by a limited number of shareholders.