1. XYZ is considering a project with the following data: Sales Revenue = $500,000 Pre-tax Cannibalization cost...
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Question:
1. XYZ is considering a project with the following data:
Sales Revenue = $500,000
Pre-tax Cannibalization cost = $50,000
Asset Cost = $450,000
Straight line depreciation over 3 years with zero salvage value
Operating costs = $250,000 (does not include depreciation)
Tax Rate 21%
a. What is the after-tax cash flow? Assume a cost of capital of 10% and that the cash flows are constant
for 3 years. What is the NPV?
b. What is the NPV if we need to invest $10,000 in NWC today to open the doors and the NWC will be
recovered in year 3?
Related Book For
Taxes And Business Strategy A Planning Approach
ISBN: 9780132752671
5th Edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon
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