A firm wants to invest in a project whose financial information is below. The tax rate is 30%, and the MARR (Minimum Attractive Rate of Return) is 16%. Answer the following questions based on the information given in the table. Initial investment cost (TL) 155,000 Operating expenses (TL/year) 42,000 General maintenance cost (TL) (end of 3rd year) 26,500 Income (TL/year) 65,000 Salvage value (TL) 41,000 Economic life (year) 5 Taking into account the net cash flows of the project after tax; a) Calculate the annual depreciation amount required by the company for the project using the straight-line (SL) depreciation method. b) What is the project's net cash flow amount in the initial period? c) What is the project’s net cash flow amount in the operating periods? d) What is the project's net cash flow amount in the last period? e) Calculate the Net Present Value of the project and evaluate it from an economic point of view.
A firm wants to invest in a project whose financial information is below. The tax rate is 30%, and the MARR (Minimum Attractive Rate of Return) is 16%. Answer the following questions based on the information given in the table. Initial investment cost (TL) 155,000 Operating expenses (TL/year) 42,000 General maintenance cost (TL) (end of 3rd year) 26,500 Income (TL/year) 65,000 Salvage value (TL) 41,000 Economic life (year) 5 Taking into account the net cash flows of the project after tax; a) Calculate the annual depreciation amount required by the company for the project using the straight-line (SL) depreciation method. b) What is the project's net cash flow amount in the initial period? c) What is the project’s net cash flow amount in the operating periods? d) What is the project's net cash flow amount in the last period? e) Calculate the Net Present Value of the project and evaluate it from an economic point of view.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 2P
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A firm wants to invest in a project whose financial information is below. The tax rate is 30%, and the MARR (Minimum Attractive
| Initial investment cost (TL) | 155,000 |
| Operating expenses (TL/year) | 42,000 |
| General maintenance cost (TL) (end of 3rd year) | 26,500 |
| Income (TL/year) | 65,000 |
| Salvage value (TL) | 41,000 |
| Economic life (year) | 5 |
Taking into account the net
a) Calculate the annual
b) What is the project's net cash flow amount in the initial period?
c) What is the project’s net cash flow amount in the operating periods?
d) What is the project's net cash flow amount in the last period?
e) Calculate the
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