Bugs Buster Is Considering Investing in a New Risky Project

question 25

Multiple Choice

Bugs Buster is considering investing in a new risky 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 percent.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 percent and marginal tax rate is 35 percent.The risk premium for the project is 3 percent.What is the present value of the terminal after-tax cash flow?

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

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Definitions:

Strengths Assessments

Tools or processes used to identify an individual's areas of strong performance or talent, often for personal development or organizational placement.

Background Checks

A process used by organizations to verify the credentials and history of potential employees.

Job Rotation

A human resource strategy involving the movement of employees between different jobs or tasks to increase work variety and promote skills development.

Routine Assignments

Tasks or duties that are part of a regular schedule or procedure, often repetitive and considered to be of a standard or typical nature.