Question: KRZ Company has hired you to help evaluate several projects. The firms tax rate is 40 percent and the appropriate discount rate is 10 percent.

KRZ Company has hired you to help evaluate several projects. The firm’s tax rate is 40 percent and the appropriate discount rate is 10 percent. Each asset class is small and will be terminated at the end of each project. KRZ is not capital constrained. The initial investment is $4,000; annual pre-tax operating cash flow is $2,000; salvage value is $500; the CCA rate is 30 percent; and the length of the project is three years. Should KRZ take this project?

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