A firm is considering an investment in a new product with annual revenues of $1,250,000.  Variable costs of $500,000 per year.  Fixed cost of $200,000 per year (fixed cost do not include depreciation).  All receipts and payments begin one year from today and end five years from today.  Annual tax rate is 34%.  The production equipment purchased at date 0 is depreciated to a zero book value (will not sell at the end of the project). 

 Assume that the total present value of the after-tax cash flows from operations is $1,762,716.  Opportunity cost of capital is 10%.    

What is the annual depreciation expense?

Answer rating: 100% (QA)

SOLUTION To determine the annual depreciation expense we need to calculate the initial investment in ... View the full answer