Niwot IncIs Considering an Investment That Will Generate $600,000 in Revenues

question 40

Multiple Choice

Niwot Inc.is considering an investment that will generate $600,000 in revenues per year for 7 years and has $360,000 of cash expenses for the same period (before income taxes) .The cost of the asset is $420,000 and it will be depreciated using straight-line depreciation over the 7 year life.The asset has no salvage value.Niwot's tax rate is 30%.The cost of capital is 9%.
What is the annual after-tax cash flow associated with this investment?

• A)$240,000
• B)$186,000
• C)$126,000
• D)$150,000
• E)None of the answer choices is correct.