Sarafin Inc

question 35

Essay

Sarafin Inc.is considering a project that would require an initial investment of $693,000 and would have a useful life of 7 years.The annual cash receipts would be $416,000 and the annual cash expenses would be $208,000.The salvage value of the assets used in the project would be $35,000.The company's tax rate is 30%.For tax purposes,the entire initial investment without any reduction for salvage value will be depreciated over 5 years.The company uses a discount rate of 15%.
Required:
Compute the net present value of the project.

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Definitions:

NSF Check

A check that cannot be processed because the drawer's account does not have sufficient funds.

Outstanding Checks

Checks that have been written and recorded in the issuer's accounting system but have not yet been cashed or cleared by the bank.

Bank Reconciliation

The process of matching and comparing figures from the accounting records against those shown on a bank statement to ensure consistency.