Amazing Lace has an opportunity to invest in a ten-year project that requires an initial investment of $2 million in a capital asset with a CCA rate of 20 percent.The initial net working capital requirement is $200,000,which will remain unchanged throughout the life of the project.The capital asset is expected to sell for $75,000 when the project terminates.Assume the asset class is closed upon termination of the project.The firm's cost of capital is 10.5 percent and marginal tax rate is 40 percent.What is the ending after-tax cash flow?

Question

Quizplus · Accepted Answer

Ending UCC = $2,000,000*(1 - 20%/2)*(1 - 20%)⁹ = $241,591.91,ECF = $75,000 + $200,000 - $(75,000 - 241,591.91)*40% = $341,636.76

Amazing Lace Has an Opportunity to Invest in a Ten-Year