Question
XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project. The NWC
XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project. The NWC will need to be increase by another $5,000 at the end of year t=2 and it will remain at the $45,000 level until the project is completed. The projects will lead to an increase in operating pre-tax net revenue of $180,000 per year and will last for 4 years. At the end of the project (beginning of year t=5), the equipment can be sold for the salvage value of $200,000. The equipment belongs to the CCA class with d=30%, the corporate income tax rate is 40%, and the cost of capital is 8%
Write down the UCC/CCA table. Use the format below:
(All interest rates are annually compounded unless stated otherwise. All bonds have a face value of $1000 unless stated otherwise)
Year UCC (beginning of the year) CCA UCC (end of the year) N 1 2 3 4Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started