Kramer Corporation is considering two investment projects, each of which would require $50,000. Cost and cash flow
Question:
Kramer Corporation is considering two investment projects, each of which would require $50,000. Cost and cash flow data concerning the two projects follow:
The high-speed photocopier will have a salvage value of $62,500 in eight years. For tax purposes, the company computes CCA deductions assuming a 20% rate. The photocopier would be depreciated over eight years. At the end of eight years, the investment in working capital would be released for use elsewhere. The company requires an after-tax return of 10% on all investments. The tax rate is 30%.
Required:
Compute the net present value of each investment project. (Round all dollar amounts to the nearest whole dollar.)
Net Present ValueWhat is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Items and Computations Years 1 Amount 2 Tax Effect 1 2 AfterTax Ca...View the full answer
Introduction to Managerial Accounting
ISBN: 978-1259105708
5th Canadian edition
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
