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Business, 11.08.2021 05:00 suepath2844

A project requires an initial investment in an asset that costs $200,000 and expects to produce a cash flow before taxes of $120,000 per year for 2 years (i. e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 30 percent. The assets will depreciate using the MACRS 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 12 percent. Assume that the asset can sell for book value at the end of the project. Requried:
Calculate the NPV of the project (approximately).

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