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

question 112

Essay

(Appendix 8C)Revello Corporation is considering a capital budgeting project that would require investing $40, 000 in equipment with a 4 year useful life and zero salvage value.Data concerning that project appear below: An investment of $30, 000 in 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.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 company's tax rate is 30% and the after-tax discount rate is 9%.
Required:
Determine the net present value of the project.Show your work!

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Definitions:

Abandoned Property

Assets or possessions left by an owner who intentionally relinquishes all rights to control it, often leading to the right of acquisition by others.

New Apartment

A living space in a residential building that has recently been built or has never been occupied before.

Sofa

A piece of furniture designed for seating multiple people, typically upholstered and used in living rooms or lounges.

Bailed Property

Property that is temporarily transferred to another party (the bailee) for custody or safekeeping, under an agreement called a bailment.