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asaini1254 asaini1254
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5 months ago
Suppose a six-year project requires an initial capital investment of $425,000 and an initial net working capital investment of $50,000. The project is expected to provide operating revenue of $270,000 per year. The associated operating costs are expected to be $130,000 per year. The capital asset belongs to Class 9 and has a CCA rate of 30%. The asset is expected to sell for $40,000 when the project terminates. Assume the asset class remains open when the asset is sold and the accelerated investment incentive is applicable for CCA in year 1. The firm's marginal tax rate is 40% and cost of capital is 8%. What impact would it have on the project's NPV if the cost of capital were 10%?

▸ NPV increases by 20.49%.

▸ NPV increases by 32.68%.

▸ NPV decreases by 20.49%.

▸ NPV decreases by 32.68%.
Textbook 
Corporate Finance

Corporate Finance


Edition: 5th
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kingqadrikingqadri
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5 months ago
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asaini1254 Author
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5 months ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
IvanaVR
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Yesterday
You make an excellent tutor!
novae
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2 hours ago
Smart ... Thanks!
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