Question
After paying 3 million for a feasibility study, cougar goods ltd. wrote a proposal with the following cash flow estimates for a 20-year capital project.
After paying 3 million for a feasibility study, cougar goods ltd. wrote a proposal with the following cash flow estimates for a 20-year capital project. Equipment cost: 30 million, Shipping cost: 2 million, Installation: 20 million, Salvage: 4 million, Working capital investment: 2 million, Revenues are expected to increase by 20 million per year and cash operating expenses by 9 million per year. The firm's marginal tax rate is 40 percent, its weighted average cost of capital is 9% and the firm requires a 3-year payback. Assuming conventional straight-line depreciation, calculate the annual depreciation expense for this project.
A. 2.4 MILLION
B. 2.2 MILLION
C. 2.0 MILLION
D. 2.6 MILLION
E. NONE OF THE ABOVE
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
978-1259277160
