(Appendix 8C)Lanfranco Corporation Is Considering a Capital Budgeting Project That

question 76

Multiple Choice

(Appendix 8C) Lanfranco Corporation is considering a capital budgeting project that would require investing $160, 000 in equipment with an expected life of 4 years and zero salvage value.Annual incremental sales would be $480, 000 and annual incremental cash operating expenses would be $330, 000.The project would also require an immediate investment in working capital of $10, 000 which would be released for use elsewhere at the end of the project.The project would also require a one-time renovation cost of $100, 000 in year 3.The company's income tax rate is 35% and its after-tax discount rate is 6%.The company uses straight-line depreciation.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 entire project is closest to:

• A)$161, 748
• B)$169, 668
• C)$221, 000
• D)$273, 670

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Definitions:

Cryptic Female Choice

Cryptic female choice refers to a form of sexual selection that arises after mating, when females store and separate sperm from different males and thus bias which sperm they use to fertilize their eggs.

Sperm Competition

Sperm competition is a form of sexual selection that arises after mating, when males compete for fertilization of a female’s eggs.

Sexual Selection

A mode of natural selection where certain traits increase an individual's chances of mating and reproduction.

Onthophagus Acuminatus

A species of dung beetle, known for its role in nutrient cycling and soil aeration.