Demirjian Inc

question 5

Multiple Choice

Demirjian Inc. is considering an investment project that would require an initial investment of $290,000 and that would last for 8 years. The annual cash receipts from the project would be $189,000 and the annual cash expenses would be $85,000. The equipment used in the project could be sold at the end of the project for a salvage value of $29,000. The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 7 years without any reduction for salvage value. The company uses a discount rate of 13%.
-When computing the net present value of the project, what are the annual after-tax cash receipts?

• A) $56,700
• B) $104,000
• C) $132,300
• D) $147,571

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