Discuss what is the net present value of the project

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

Investment required in equipment $450,000

Net annual operating cash inflow $220,000

Tax rate 30%

After-tax discount rate 12%

The expected life of the project and the equipment is 3 years and the equipment has zero salvage value. The company uses straight-line depreciation on all equipment and the depreciation expense on the equipment would be $150,000 per year. 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 annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses.

Required:

What is the net present value of the project?

Reference no: EM131818035

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