Reference no: EM131339944
A 6 year capital projcect, code name Jackal, costs $27,695 (year 0). It is expected to produce the following operating cash flows (revenues minus expenses)
Year Operating Cash Flows
1 $6,250
2 6,688
3 7,156
4 7,657
5 8,192
6 8,766
Project NPV (sale of existing Asset)
The Jackal project will be depreciated, straight line, over its 6 year life. The corporate tax rate is 34%, and the required rate of return on the project is 9%. The Jackal project will replace the existing Condor project that has a book value of $2,000. The Condor project will be sold for $3.500.
A. Calculate the initial investment (year 0) cash flows for this project.
B. What is the projects NPV?
C. If the Condor project had a book value of $4,000, how would that change the NPV of the Jackal project?
D. How would a reduction in the corporate tax rate to 26% change your answer in parts b and c?
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: A 6 year capital projcect, code name Jackal, costs $27,695 (year 0). It is expected to produce the following operating cash flows (revenues minus expenses) Calculate the initial investment (year 0) cash flows for this project. If the Condor project h..
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