Question: IMB Inc., whose tax rate = 3 0 % , is considering a 2 2 - year project which requires an initial cash outlay of

IMB Inc., whose tax rate =30%, is considering a 22-year project which requires an initial cash outlay of $920,000, and has annual cash flows of $93,000.90-Day T-bills and 30-year government bonds are currently paying 2% and 4.5%, respectively. Should IMB Inc. undertake this project assuming the opportunity cost of capital =12%(*assume the following: CCA =25% and the salvage value = $250,000). Does your answer change if the risk of the project is over-estimated, and the discount rate is subsequently adjusted by 1.25%?

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