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Dobrinski Corporation has provided the following information concerning a capital budgeting project: After-tax discount rate 14 % Tax rate 30 % Expected life of the
Dobrinski Corporation has provided the following information concerning a capital budgeting project:
| After-tax discount rate | 14 | % | |
| Tax rate | 30 | % | |
| Expected life of the project | 4 | ||
| Investment required in equipment | $ | 240,000 | |
| Salvage value of equipment | $ | 0 | |
| Working capital requirement | $ | 30,000 | |
| Annual sales | $ | 630,000 | |
| Annual cash operating expenses | $ | 480,000 | |
| One-time renovation expense in year 3 | $ | 60,000 | |
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.
Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
The net present value of the project is closest to:
Multiple Choice
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$77,709
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$210,000
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$144,210
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$59,949
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