19. Project NPV and IRR (S6.2, S6.3) A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 8%. Ignore inflation.

Chapter 6 Making Investment Decisions with the Net Present Value Rule 177

a. Calculate project NPV for each company.