Munir S/B has provided the following data concerning a proposed investment project: Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (vi) What is the NPV of the project?
Munir S/B has provided the following data concerning a proposed investment project: Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (vi) What is the NPV of the project?
Financial & Managerial Accounting
13th Edition
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter25: Capital Investment Analysis
Section: Chapter Questions
Problem 25.1APR
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Question 17
Munir S/B has provided the following data concerning a proposed investment project:
|
Initial investment.................. |
$861,000 |
|
Annual net cash receipts...... |
$271,000 |
|
Life of the project................. |
5 years |
|
Salvage value...................... |
$129,000 |
The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%.
Required:
(vi) What is the NPV of the project?
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