Darnold Corporation has provided the following information concerning a capital budgeting project: The equipment will have a 4 year expected life and zero salvage value. The company's income tax rate is 35% and the after-tax discount rate is 9%. The company uses straight-line depreciation on all equipment; the annual depreciation expense will be $10,000. 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 net present value of the project is closest to:
A)$74,497
B)$57,170
C)$34,497
D)$52,000

Question

Darnold Corporation has provided the following information concerning a capital budgeting project:  The equipment will have a 4 year expected life and zero salvage value. The company's income tax rate is 35% and the after-tax discount rate is 9%. The company uses straight-line depreciation on all equipment; the annual depreciation expense will be $10,000. 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 net present value of the project is closest to:
A)$74,497 
B)$57,170 
C)$34,497 
D)$52,000

Quizplus · Accepted Answer

The Answer is C

Darnold Corporation Has Provided the Following Information Concerning a Capital