Question: XYZ is evaluating the reno project. The project would require an initial investment of $141,000 that would be depreciated to $16,200 over 6 years using
XYZ is evaluating the reno project. The project would require an initial investment of $141,000 that would be depreciated to $16,200 over 6 years using straight-line depreciation. The project is expected to have operating cash flow of $49,300 per year forever. XYZ expects the project to have an after-tax terminal value of $383,000 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 project's relevant expected cash flow in year 6, and Z is the project expected cash flow in year 2?
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