(Appendix 8C)Mota Corporation Has Provided the Following Information Concerning a Capital

question 143

Essay

(Appendix 8C)Mota Corporation has provided the following information concerning a capital budgeting project: The expected life of the project and the equipment is 3 years and the equipment has zero salvage value.The working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment and the depreciation expense on the equipment would be $210, 000 per year.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 income tax rate is 35%.The after-tax discount rate is 15%.The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.
Required:
Determine the net present value of the project.Show your work!

---

Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the quantity of goods or services produced or sold.

Accounting Salaries

The wages or salaries paid to employees working in the accounting department, reflecting the cost associated with managing financial records and reports.

Fixed Cost

Expenses that do not change with the level of production or sales activities, such as rent, salaries, and insurance premiums.

Screen Printing

A printing technique where a mesh is used to transfer ink onto a substrate, except in areas made impermeable to the ink by a blocking stencil.