Question: QUESTION 2 XYZ is evaluating the Reno project. The project would require an initial investment of $148,000 that would be depreciated to $16,200 over 6

QUESTION 2

  1. XYZ is evaluating the Reno project. The project would require an initial investment of $148,000 that would be depreciated to $16,200 over 6 years using straight-line depreciation. The project is expected to have operating cash flows of $51,200 per year forever. XYZ expects the project to have an after-tax terminal value of $335,000 in 3 years. The tax rate is 30%. What is (X+Y)/Z if X is the project's relevant expected cash flow in year 3, Y is the project's relevant expected cash flow in year 5, and Z is the project's relevant expected cash flow in year 2?

    A.)

    A number equal to or greater than 14.27 but less than 16.30
    B.)

    A number less than 7.04 or a rate greater than 16.30
    C.)

    A number equal to or greater than 9.15 but less than 12.00
    D.)

    A number equal to or greater than 7.04 but less than 9.15
    E.)

    A number equal to or greater than 12.00 but less than 14.27

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