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DT Telecom is considering a major infrastructure investment, requiring $ 250 million in up-front investment, and cash flows for 10 years. The analyst who worked through the analysis has concluded that the net present value of the investment is $ 30 million. On reviewing his numbers, though, you note that he depreciated the initial investment ($250 million) straight line over 5 years to a salvage value of zero. Based on your reading of the tax law, you believe that the investment should be depreciated straight line over 10 years to a salvage value of $ 50 million. If your cost of capital is 8% and your tax rate is 40%, estimate the correct net present value with the changed depreciation

a.

26.99 million

b.

48.65 million

c.

17.30 million

d.

24.52 million