Texts: Use the following to answer questions 109-110: Weichman Inc. has provided the following data concerning an investment project that has been proposed:
Initial investment: $960,000
Annual cash receipts: $624,000
Life of the project: 8 years
Annual cash expenses: $281,000
Salvage value: $48,000
The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 7 years without any reduction for salvage value. The company uses a discount rate of 15%.
109. When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?
Answer: C
Level: Medium
LO: 8
Appendix: 14D
110. The net present value of the project is closest to:
A) $299,470
B) $288,483
C) $117,329
D) $128,316
Answer: A
Level: Medium
LO: 8
Appendix: 14D
