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Ontario Courier Service is considering investing in a capital asset that costs $64,000. The project ...

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Ontario Courier Service is considering investing in a capital asset that costs $64,000. The project ...

Ontario Courier Service is considering investing in a capital asset that costs $64,000. The project also requires an investment in net working capital of $8,000. The project will generate annual after-tax operating income of $20,800 for the next four years. The asset has a CCA rate of 20%, with the half-year rule applicable in the first year and is expected to sell for $7,200 at the end of four years. The firm's cost of capital is 15% and marginal tax rate is 35%. Assume the asset class remains open after the asset is sold. What is the after-tax cash flow (ECF) in the final year of the project?

▸ $15,200

▸ $21,855

▸ $7,398

▸ $23,002

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Corporate Finance

Edition: 5^th

Author: Booth

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