Question
Middlefield Motors is evaluating project Z. The project would require an initial investment of 57,000 dollars that would be depreciated to 9,500 dollars over 6
Middlefield Motors is evaluating project Z. The project would require an initial investment of 57,000 dollars that would be depreciated to 9,500 dollars over 6 years using straight-line depreciation. The first annual operating cash flow of 11,000 dollars is expected in 1 year, and annual operating cash flows of 11,000 dollars are expected each year forever. Middlefield Motors expects the project to have an after-tax terminal value of 370,500 dollars in 5 years. The tax rate is 20 percent. What is (X+Y)/Z if X is the projects relevant expected cash flow for NPV analysis in year 5, Y is the projects relevant expected cash flow for NPV analysis in year 6, and Z is the projects relevant expected cash flow for NPV analysis in year 4? Round your answer to 2 decimal places (for example, 2.89, 0.70, or 1.00).
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