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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.
What is the net present value of the project?
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