Capital Budgeting Issue
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An investment of $30,000 will be depreciated straight line for 10 years down to a zero salvage value. For its 10-year life, the investment will generate annual sales of $12,000 and annual cash operating expenses of $2,000. Although the investment is depreciated to a zero book value, it should sell for $3,000 in 10 years. The marginal income tax rate is 40% and the cost of capital is 10%. What are the net operating cash flows after tax? What is the NPV of the investment?
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Solution Summary
The solution provides step by step working for the calculation of net operating cash flow and the NPV of the investment.
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