What will be the before-tax OCF

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Suppose your firm uses the NPV rule in making investment decisions and your after-tax OCF is $900000. Assume same full debt funding at 12%, tax rate is 40%, 20 year period, straight-line depreciation, initial investment of $4200000 and after-tax exit cost of $3400000.

a. What will be the before-tax OCF?

b. If the required before-tax return on the investment is 13%, what is the NPV and do you make the investment?

c. How about if your firm requires a 7.8% after-tax rate of return?

Reference no: EM131851295

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