Berringer Company is considering an investment that will generate cash revenues of $100,000 per year for 8 years,and have cash expenses of $70,000 per year for 8 years.The cost of the asset is $80,000,and it will be depreciated using straight-line depreciation over its 8 year life.Berringer pays income taxes at a rate of 30%.The cost of capital is 12%
Required:
a.Prepare an analysis showing the annual after tax cash flow associated with this asset.
b.Compute the net present value of this investment using the cash flow you computed in a above.

Question

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The Answer of Berringer Company is considering an investment that will generate cash revenues of $100,000 per year for 8 years,and have cash expenses of $70,000 per year for 8 years.The cost of the asset is $80,000,and it will be depreciated using straight-line depreciation over its 8 year life.Berringer pays income taxes at a rate of 30%.The cost of capital is 12%
Required:
a.Prepare an analysis showing the annual after tax cash flow associated with this asset.
b.Compute the net present value of this investment using the cash flow you computed in a above.

Berringer Company Is Considering an Investment That Will Generate Cash