The SRI Company is evaluating a $450,000 investment proposal. The breakdown of the mitial outlay is:...

 

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The SRI Company is evaluating a $450,000 investment proposal. The breakdown of the mitial outlay is: Land Building $200,000 250,000 450,000 Land is expected to appreciate in value at an annual rate of 8% and to be sold at the end of the tenth year. The disposal value of the building is expected to be negligible at the end of the tenth year. SRI's tax rate is 50%, the capital cost rate on the declining balance is 10%, and the appropriate discount rate is 14%. The investment is expected to generate before tax $120,000 per year over the next ten years. The annual cash benefits can be assumed to be received at the end of the year. REQUIRED: Evaluate the proposal and determine whether or not SRI Company should make the investment. (SHOW ALL CALCULATIONS) The SRI Company is evaluating a $450,000 investment proposal. The breakdown of the mitial outlay is: Land Building $200,000 250,000 450,000 Land is expected to appreciate in value at an annual rate of 8% and to be sold at the end of the tenth year. The disposal value of the building is expected to be negligible at the end of the tenth year. SRI's tax rate is 50%, the capital cost rate on the declining balance is 10%, and the appropriate discount rate is 14%. The investment is expected to generate before tax $120,000 per year over the next ten years. The annual cash benefits can be assumed to be received at the end of the year. REQUIRED: Evaluate the proposal and determine whether or not SRI Company should make the investment. (SHOW ALL CALCULATIONS)

Answer rating: 100% (QA)

1 Cash out flow at the beggining 450000 2 Assume appreciation value of Land 8 is on commulativ... View the full answer