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Amazing Lace has an opportunity to invest in a ten-year project that requires an initial investment ...

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Amazing Lace has an opportunity to invest in a ten-year project that requires an initial investment ...

Amazing Lace has an opportunity to invest in a ten-year project that requires an initial investment of $2 million in a capital asset with a CCA rate of 20%. The initial net working capital requirement is $200,000, which will remain unchanged throughout the life of the project. The capital asset is expected to sell for $75,000 when the project terminates. Assume the asset class is closed upon termination of the project. The firm's cost of capital is 10.5% and marginal tax rate is 40%. What is the ending after-tax cash flow (ECF) assuming accelerated investment incentive is applicable for CCA in year 1?

▸ $208,363

▸ $320,162

▸ $275,000

▸ $341,637

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Corporate Finance

Edition: 5^th

Author: Booth

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