Question: Question 4 - Topic 6 NPV - Connect A project requires an initial investment of $100,000 and is expected to produce a cash inflow before

Question 4 - Topic 6 NPV - Connect A project requires

Question 4 - Topic 6 NPV - Connect A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,200 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 8%. Ignore inflation. 1. Calculate project NPV for each company. 2. What is the IRR of the after-tax cash flows for each company

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