Wable Inc Has Provided the Following Data to Be Used in in Evaluating

question 1

Multiple Choice

Wable Inc. has provided the following data to be used in evaluating a proposed investment project: For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 16%.
-When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?

• A) $55,000
• B) $38,500
• C) $16,500
• D) $0

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Definitions:

Excel Spreadsheets

A software program used for data organization, analysis, and storage in tabular form.

Profitability Index

A financial tool used to evaluate the attractiveness of an investment, calculated as the present value of future cash flows divided by the initial investment.

Net Present Value

A valuation method that calculates the worth of a future stream of cash flows by discounting them back to their present value.

IRR

Internal Rate of Return; a financial metric used to estimate the profitability of potential investments, calculating an annual growth rate.