Question
XYZ is evaluating the Reno project. The project would require an initial investment of $150,000 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 $150,000 that would be depreciated to $16,600 over 6 years using straight-line depreciation. The project is expected to have operating cash flows of $48,200 per year forever. XYZ expects the project to have an after-tax terminal value of $341,000 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 5, and Z is the project's relevant expected cash flow in year 2?
A number equal to or greater than 7.57 but less than 9.80
A number equal to or greater than 11.96 but less than 13.26
A number equal to or greater than 13.26 but less than 15.01
A number equal to or greater than 9.80 but less than 11.96
A number less than 7.57 or a rate greater than 15.01
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