Question

Year 1 Year 2 Year 3 Year 4 Year 6 ear Cash sales 150,000 435,000 488,000 300,000 240,000 $ 180,000 75,000228,000 279,000 170,000 140,000 106,000 Operating expenses 52,000 65.200 10,800 40,800 28,800 24,400 Income taxes 85,800280,000 344,200 210,800 168,800 130,400 Total cash outflows 64,200 155,000 43,800 89,20071,200 49,600 After-tax cash inflows 130,460 111040 63,19 275 29,575 Present value S 439,441 Present value of net after-tax operating cash inflows Return of deposit in 6 years Total present value of future cash flows 35,776 475,217 300,000 Investment required S 175,21 7 Net positive (negative) present value What is the maximum amount that could be invested and still earning a 9% annual return? $ 475 217 F6 F8 F9 F10 F11 F12 F5 96

Assuming an income tax rate of 40% and a desired annual return of 9%, what is the net present value

of this investment opportunity? What is the maximum amount that could be invested and still earning

a 9% annual return? (Round amounts to the nearest dollar.)

Answer 1