Question: Java Cafe s tax rate is 45 percent and the appropriate
Java Cafe’s tax rate is 45 percent and the appropriate discount rate is 8 percent. It is considering another project. Each asset class consists only of the project asset and will be terminated at the end of the project. Java Cafe is not capital constrained. The initial investment is $85,000; annual pre-tax operating cash flow is $32,500; salvage value is $65,000; the CCA rate is 30 percent; and the length of the project is six years. Should Java Cafe take this project?
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