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Basic capital budgeting problem with straight line depreciation. The Roberts company has cash inflows of $140,000 per year on project A and cash outflows of $100,000 per year. The investment outlay on the project is $100,000. Its life is 10 years. The tax rate is 40%. The opportunity cost of capital is 12%.

a. Present two alternative formulations of the net cash flows adjusted for the depreciation tax shelter.

b. Calculate the net present value for project A, using straight line depreciation for tax purposes.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9790785

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