(Appendix 8C)The Following Information Concerning a Proposed Capital Budgeting Project

question 146

Multiple Choice

(Appendix 8C) The following information concerning a proposed capital budgeting project has been provided by Wick Corporation: The expected life of the project is 4 years.The income tax rate is 35%.The after-tax discount rate is 14%.The company uses straight-line depreciation on all equipment and the annual depreciation expense would be $60, 000.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The net present value of the project is closest to:

• A)$101, 282
• B)$224, 850
• C)$119, 042
• D)$266, 500

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Definitions:

Indifference Curves

Graphical representations in economics that show combinations of two goods between which a consumer is indifferent, reflecting preferences and utility.

Bundle

In economics, a combination or collection of goods and services considered as a single entity for the purpose of analysis or transaction.

Constants

In mathematics and science, fixed values that remain the same throughout an equation or experiment.

Indifference Curve

A graph representing combinations of goods between which a consumer is indifferent, showing preference levels and trade-offs.