Solution-Taxes for the first year of project

Taxes for the first year of project

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Reference no: EM131317743

Margarite's Enterprises is considering a new project that will require $345,000 for new fixed assets, $160,000 for inventory, and $35,000 for accounts receivable. Short-term debt is expected to increase by $110,000. The project has a 5-year life. The fixed assets will be depreciated straight-line to zero over the life of the project. At the end of the project, the fixed assets can be sold for 25 percent of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $550,000 and costs of $430,000. The tax rate is 35 percent and the required rate of return is 15 percent.

What is the amount of the earnings before interest and taxes for the first year of this project?

$38,500
$51,000
$76,500
$67,000
$159,000

Reference no: EM131317743

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Taxes for the first year of project

Reference no: EM131317743

Reference no: EM131317743

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