You have been given the following information on a project: It has a 3-year lifetime The initial investment in the project will be $28 million, and the investment will be depreciated straight-line, down to a salvage value of $6 million at the end of the fourth year. The revenues are expected to be $20 million next year and to grow 6% a year after that for the remaining two years. The cost of goods sold, excluding depreciation, is expected to be 53% of revenues. The tax rate is 0.36. Estimate the after-tax return on capital, by year, to find the average for the project. (Round answer to four decimal places.)
You have been given the following information on a project: It has a 3-year lifetime The initial investment in the project will be $28 million, and the investment will be depreciated straight-line, down to a salvage value of $6 million at the end of the fourth year. The revenues are expected to be $20 million next year and to grow 6% a year after that for the remaining two years. The cost of goods sold, excluding depreciation, is expected to be 53% of revenues. The tax rate is 0.36. Estimate the after-tax return on capital, by year, to find the average for the project. (Round answer to four decimal places.)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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