BC Travel Services Is Considering a New Ten-Year Project That

question 55

Multiple Choice

BC Travel Services is considering a new ten-year project that will generate additional sales revenue of $200,000 per year.The associated costs are $120,000 per year.The project is somewhat riskier than the company's current operations,and hence requires a risk premium of 2 percent.The company's cost of capital is 12 percent and marginal tax rate is 40 percent.What is the present value of the after-tax operating cash flows?

• A) $250,374
• B) $271,211
• C) $417,289
• D) $452,018