What happens to the ROC for project

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Reference no: EM131815934

1. What happens to the ROC for a project if we use acclerated depreciation?

a. It would decrease the yearly ROC for the depreciation amounts greater than the straight-line amount.

b. It would increase the yearly ROC for the depreciation amounts less than straight-line amount.

c. It would likely increase the project's average ROC

d. Two of the above

e. All of the above.

2. 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 (0) 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.

(Answer format is a zero, a decimal point, then 4 digits, for example 0.1234)

Reference no: EM131815934

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