Weichman Inc. has provided the following data concerning an investment project that has been proposed:
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Initial investment
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$960,000
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Annual cash receipts
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$624,000
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Life of the project
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8 years
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Annual cash expenses
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$281,000
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|
Salvage value
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$48,000
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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%.
1. When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?
A) $48,000
B) $14,400
C) $33,600
D) $0
2. The net present value of the project is closest to:
A) $299,470
B) $288,483
C) $117,329
D) $128,316