A firm is considering the following investment project:

Year                             Before tax Cash Flow (thousands)

0......................................................-$1000

1.........................................................+500

2.........................................................+340

3.........................................................+244

4........................................................ +100

The project has a 5-year useful life with a $125,000 salvage value, as shown. Double declining balance depreciation will be used, assuming the $125,000 , salvage value. The income, tax rate is 34%. If the firm requires a 10% after-tax rate of return, should the project be undertaken?

Transcribed Image Text:

+100 +125 Salvage value