Question
XYZ is evaluating the Reno project. The project would require an initial investment of $131,000 that would be depreciated to $16,600 over 6 years using
XYZ is evaluating the Reno project. The project would require an initial investment of $131,000 that would be depreciated to $16,600 over 6 years using straight-line depreciation. The project is expected to have operating cash flows of $51,500 per year forever. XYZ expects the project to have an after-tax terminal value of $330,000 in 3 years. The tax rate is 30%. What is (X+Y)/Z if X is the project's relevant expected cash flow in year 3, Y is the project's relevant expected cash flow in year 6, and Z is the project's relevant expected cash flow in year 2?
A number equal to or greater than 14.55 but less than 16.66 | ||
A number equal to or greater than 11.89 but less than 14.55 | ||
A number equal to or greater than 6.91 but less than 8.84 | ||
A number less than 6.91 or a rate greater than 16.66 | ||
A number equal to or greater than 8.84 but less than 11.89 |
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