Two mutually exclusive proposals (Project D and Project J) will be analyzed using a 12.5% discount rate. Marginal tax rate of the company is 40%. The information on Project D (investment horizon = 6 years) is below (amount in $ thousands). If Project D were financed 50 percent by debt (at a coupon rate of 8%), the net income (in thousands) for the first year would be closest to:

Information on Project D:

Initial fixed capital outlay (including 5,000 allocated to land) = 30,000

Increase in net working capital (all of this will be recovered at the end of the project) = 20,000

Annual sales revenues (cash) = 50,000; Annual operating costs (cash) = 30,000; Annual depreciation = 1,000

Salvage value (book) at end of investment horizon = 24,000

Salvage value (market) at end of investment horizon = 22,000

Question 5 options:

	10,635
	10,680
	10,125