A project requires an initial investment of $6 million and will yield operating cash flows of $1.5 million per year for the next 10 years. At the end of 10 years, the project’s assets can be divested for $350,000. The marginal tax rate is 35%, and the CCA rate is 30%. If the required rate of return is 15%, what is the present value of the CCA tax shields? Select one: a. $1,329,042.73 b. $1,308,432.91 c. $1,288,508.90 d. $1,210,537.92 e. $1,049,551.30
A project requires an initial investment of $6 million and will yield operating cash flows of $1.5 million per year for the next 10 years. At the end of 10 years, the project’s assets can be divested for $350,000. The marginal tax rate is 35%, and the CCA rate is 30%. If the required rate of return is 15%, what is the present value of the CCA tax shields? Select one: a. $1,329,042.73 b. $1,308,432.91 c. $1,288,508.90 d. $1,210,537.92 e. $1,049,551.30
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 1P
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A project requires an initial investment of $6 million and will yield operating cash flows of $1.5 million per year for the next 10 years. At the end of 10 years, the project’s assets can be divested for $350,000. The marginal tax rate is 35%, and the CCA rate is 30%. If the required
Select one:
a. $1,329,042.73
b. $1,308,432.91
c. $1,288,508.90
d. $1,210,537.92
e. $1,049,551.30
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