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The Brassy Fin Pet Shop is considering an expansion. Construction will cost $90,000 and will be depreciated to zero, using straight-line depreciation, over five years.
The Brassy Fin Pet Shop is considering an expansion. Construction will cost $90,000 and will be depreciated to zero, using straight-line depreciation, over five years. Earnings before depreciation are expected to be $20,000 in each of the next five years. The firms tax rate is 34 percent.
a. What are the projects cash flows?
b. Should the project be undertaken if the firms cost of capital is 11 percent?
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