Capital budgeting with taxes Malinkrod is investigating the purchase of a small hard- ware store as an investment. The asking price is $48,000. The store operates in leased space with a nonrenewable lease that expires in 15 years. Annual sales are $50,000 and cost of goods sold is 60 percent of sales. Other operating expenses, not including depreciation, are $7,500 per year. Depreciation is $6,000 per year. Malinkrod's marginal tax rate is 34 percent. He has decided that the investment must earn at least a 16 percent return.

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REQUIRED a. Find the annual net cash inflow after taxes for the investment. b. Evaluate the investment using the NPV and PI methods.