Question
Easy payment loan company is thinking of opening a new office , and the key data are shown below. The CCA rate is 30%. The
Easy payment loan company is thinking of opening a new office , and the key data are shown below. The CCA rate is 30%. The equipment would be deprecieted over the project's 3 year lofr, and would have a salvage and net book value of $20 000. An extra $5 000 of new working capital would be required to get this project running. Revenues and cash operating costs would be constant over the project's 3 year life. Should the company proceed with the idea of opening a new office?
WACC 15%
Net equipment capital cost $155 000
Saving after tax, each year $125 000
Tax rate 35%
Perform a cash flow analysis.
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