Question
Brodigan Corporation has provided the following information concerning a capital budgeting project: Investment required in equipment $450,000 Net annual operating cash inflow 220,000 Tax rate
Brodigan Corporation has provided the following information concerning a capital budgeting project:
Investment required in equipment $450,000
Net annual operating cash inflow 220,000
Tax rate 30%
After -tax discount rate 12%
The expected life of the project and equipment is 3 years. The equipment has zero salvage value. The company uses straight line depreciation and the depreciation expense on the equipment would be $150,000 per year. Assume cash flows occur at the end of the year except for initial investments, and takes income taxes into account in its capital budgeting.
Required:
What is the net present value of the project. Show your work.
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