Maxwell Corp. is considering a project that requires an initial investment of $350,000; the project life is three years; before-tax cost savings are $150,000 per year; salvage value will be $30,000 when the fixed assets are sold in year 3; the tax rate is 27%; and the discount rate is 11%. Assume there is no change in net working capital, and assume a CCA rate of 20%. 

a) What is the present value of the CCA tax shield in year 0?

b) What are cash flows from assets in years 0-3?

c) What is the net present value of the proposed project? Should Maxwell Corp. accept the project?

Answer rating: 100% (QA)

a The present value of the C CA tax shield in year 0 is co... View the full answer