Berringer Company Is Considering an Investment That Will Generate Cash

question 65

Essay

Berringer Company is considering an investment that will generate cash revenues of $100,000 per year for 8 years,and have cash expenses of $70,000 per year for 8 years.The cost of the asset is $80,000,and it will be depreciated using straight-line depreciation over its 8 year life.Berringer pays income taxes at a rate of 30%.The cost of capital is 12%
Required:
a.Prepare an analysis showing the annual after tax cash flow associated with this asset.
b.Compute the net present value of this investment using the cash flow you computed in a above.

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Definitions:

Iconic Memory

A type of visual memory that holds an exact copy of what is seen for a very short period of time.

Recall

The act of retrieving information or memories from one's past experiences, often without the aid of external cues.

Memory Retention

The ability to preserve information over time through the processes of encoding, storing, and retrieving.

Relearning

The process of learning material or skills that were once learned and then forgotten, which often requires less time than the initial learning.