Question
Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for the project if the cost of capital is 14%. Initial Investment:
Boomerang Bungee Corp. is considering the following project. Determine the equal annual annuity for the project if
the cost of capital is 14%.
Initial Investment: $75,000
Year Cash Inflows
1 $30,000
2 $35,000
3 $40,000
a.
$2,259.62
b.
$4,355.25
c.
$7,768.67
d.
$5,527.89
Outback is purchasing a new machine that will cost $98,000. The machine will qualify as MACRS 5-year property but
has an economic life of 8 years. The new machine is expected to increase revenues by $35,000 per year, and
operating costs are expected to increase by $15,000 per year. If the firm's marginal tax rate is 34 percent and the first
year's depreciation rate is 20 percent, what is the net cash flow in the first year.
a.
$7,984
b.
$26,034
c.
$19,864
d.
$264
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