2D1C SKYTOP INDUSTRIES IS ANALYZING A CAPITAL INVESTMENT PROJECT USIN...
309.
CSO: 2D1c
LOS: 2D1c
Skytop Industries is analyzing a capital investment project using discounted cash flow
(DCF) analysis. The new equipment will cost $250,000. Installation and transportation
costs aggregating $25,000 will be capitalized. The appropriate five year depreciation
schedule (20%, 32%, 19%, 14.5%, 14.5%) will be employed with no terminal value
factored into the computations. Annual incremental pre-tax cash inflows are estimated at
$75,000. Skytop’s effective income tax rate is 40%. Assuming the machine is sold at the
end of Year 5 for $30,000, the after-tax cash flow for Year 5 of the project would amount
to
a.
$63,950.
b.
$72,950.
c.
$78,950.
d.
$86,925.