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What is the after-tax payback reciprocal for candy capital

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Reference no: EM133006919

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 payback reciprocal for Candy's capital budgeting proposal?

A. 50%
B. 26-2/3%
C. 20%
D. 33-1/3%

Reference no: EM133006919

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