Question: KRZ Company s tax rate is 40 percent and the appropriate
KRZ Company’s tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not capital constrained. There is no change in net working capital at the beginning or at the termination of the project. The initial investment is $12,000; annual pre-tax operating cash flow is $1,600; salvage value is $750; the CCA rate is 20 percent; and the length of the project is 10 years. Should KRZ take this project?
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