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What is after-tax rate of return on candy capital budgeting

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Reference no: EM133006918

The Candy Company is evaluating a capital budgeting proposal for the current year. The relevant data follow:

  • The initial investment would be P30,000. It would be depreciated on a straight-line basis over six years with no salvage value.
  • The before-tax annual cash inflow due to this investment is P10,000, and the income tax rate is 40% paid in the same year as incurred.
  • The desired rate of return is 15%. All cash flows occur at year end.

Problem 1: What is the after-tax rate of return on Candy's capital budgeting proposal?

A. 10%
B. 33-1/3%
C. 16-2/3%
D. 26-2/3%

Reference no: EM133006918

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