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

question 103

Essay

(Appendix 8C)Diss Corporation is considering a capital budgeting project that involves investing $570, 000 in equipment that would have a useful life of 3 years and zero salvage value.The net annual operating cash inflow, which is the difference between the incremental sales revenue and incremental cash operating expenses, would be $290, 000 per year.The company uses straight-line depreciation and the depreciation expense on the equipment would be $190, 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 30%.The after-tax discount rate is 6%.
Required:
Determine the net present value of the project.Show your work!

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Definitions:

Suppliers

Entities that provide goods or services to another company or individual, often as part of a supply chain or market.

Laptops

Portable personal computers with a clamshell form factor, suitable for mobile use and equipped with a screen and alphanumeric keyboard.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded, often considered the market-clearing price.

Equilibrium Quantity

The quantity of goods supplied is equal to the quantity demanded at the market equilibrium price.