Shinabery Corporation has provided the following information concerning a capital budgeting project:

The company's income tax rate is 35% and its after-tax discount rate is 9%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. 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 net present value of the entire project is closest to:
A)$39,675
B)$68,280
C)$25,515
D)$65,000

Question

Shinabery Corporation has provided the following information concerning a capital budgeting project:

The company's income tax rate is 35% and its after-tax discount rate is 9%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. 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 net present value of the entire project is closest to:
A)$39,675 
B)$68,280 
C)$25,515 
D)$65,000

Quizplus · Accepted Answer

The correct answer is A because the net present value of the entire project is closest to $39,675. This is calculated by taking the sum of the present values of all the cash flows over the life of the project, which is $39,675.

Shinabery Corporation Has Provided the Following Information Concerning a Capital