Question
Middlefield Motors is evaluating project Z. The project would require an initial investment of 72,500 dollars that would be depreciated to 7,500 dollars over 5
Middlefield Motors is evaluating project Z. The project would require an initial investment of 72,500 dollars that would be depreciated to 7,500 dollars over 5 years using straight-line depreciation. The first annual operating cash flow of 22,000 dollars is expected in 1 year, and annual operating cash flows of 22,000 dollars are expected each year forever. Middlefield Motors expects the project to have an after-tax terminal value of 383,500 dollars in 4 years. The tax rate is 30 percent. What is (X+Y)/Z if X is the projects relevant expected cash flow for NPV analysis in year 4, Y is the projects relevant expected cash flow for NPV analysis in year 5, and Z is the projects relevant expected cash flow for NPV analysis in year 3? Round your answer to 2 decimal places (for example, 2.89, 0.70, or 1.00).
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