Monteregie Auto Services is considering an opportunity to invest $550,000 in a capital asset that will generate additional after-tax operating income of $200,000 per year.The asset has a six-year life, a CCA rate of 20%, and an expected salvage value of $60,000 at the end of the 6^th year.The project has a beta of 1.5.The company's cost of capital is 12% and marginal tax rate is 35%.The risk-free rate is 4.5% and the market risk premium is 6%.Ignoring CCA, what is the present value of the after-tax operating cash flows?

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The Answer of Monteregie Auto Services is considering an opportunity to invest $550,000 in a capital asset that will generate additional after-tax operating income of $200,000 per year.The asset has a six-year life, a CCA rate of 20%, and an expected salvage value of $60,000 at the end of the 6^th year.The project has a beta of 1.5.The company's cost of capital is 12% and marginal tax rate is 35%.The risk-free rate is 4.5% and the market risk premium is 6%.Ignoring CCA, what is the present value of the after-tax operating cash flows?

Monteregie Auto Services Is Considering an Opportunity to Invest $550,000