The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net...

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The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net operating working capital. The company's cost of capital is 6%. The proposed asset costs $400,000, will require $20,000 to modify for operations, and falls in the 3-year class MACRS for depreciation rates: .33, .45, .15, and .07 for years 1 through 4, respectively. At the end of the 4 years, it is expected that the asset may sell for $30,000. The company's tax rate is 21%.a) What is the initial outlay for this project? b) What are the operating cash flows in Years 1 through 4?c) As part of the terminal cash flow in Year 4, what is the after-tax salvage value of the asset? d) What is the net present value of this proposed asset investment? Should it be accepted or rejected? 

Question

The DoNotMissSnow Company is evaluating an asset that may increase sales by $120,000 every year for 4 years. There is no expected change in net...

  • Written in: 17-Oct-2019
  • Paper ID: 381697
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About this Question

STATUS

Approved

DATE ANSWERED

Oct 17, 2019

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N/A

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