Question
1)Pont Corporation has provided the following information concerning a capital budgeting project: Investment required in equip is $160,000 expected project life 4 equip salvage value
1)Pont Corporation has provided the following information concerning a capital budgeting project: Investment required in equip is $160,000 expected project life 4 equip salvage value 0 annual sales $470,000 annual cash operating expenses $340 working capital requirement $20,000 one time renovation yr 3 is $70,000
The company's income tax rate is 30% and its after-tax discount rate is 10%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
The total cash flow net of income taxes in year 2 is:
$90,000
$54,000
$130,000
QUESTION 2
Battaglia Corporation is considering a capital budgeting project that would require investing $240,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $620,000 and annual incremental cash operating expenses would be $460,000. The project would also require a one-time renovation cost of $80,000 in year 3.
The company's income tax rate is 30% and its after-tax discount rate is 7%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
The total cash flow net of income taxes in year 2 is:
$160,000
$100,000
$130,000
$74,000
please show all work. Financial calculators are NOT permitted we are only allowed to use basic calculator. Thank you
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started