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(solution) Prudencio Corporation has provided the following information concerning a capital


(Appendix 8C) Prudencio Corporation has provided the following information concerning a capital budgeting project: After-tax discount rate13%Tax rate30%Expected life of the project4Investment required in equipment$160,000Salvage value of equipment$0Annual sales$400,000Annual cash operating expenses$290,000One-time renovation expense in year 3$40,000 The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The total cash flow net of income taxes in year 3 is: $70,000$49,000$89,000$61,000

 

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