Question

18. Marble Campground is considering adding a driving range to its facility. The range would cost $60,000, would be depreciated on a straight-line basis over its 6-year life, and would have a zero salvage value. The anticipated revenue from the project is $46,000 a year with $10,000 variable cost. The fixed cost would be $6,000. The project will require $6,000 of net working capital each year, which is recoverable at the end of the project. What is the internal rate of return on this project at a tax rate of 20 percent?
a. 30.62 percent
b. 32.74 percent
c. 38.42 percent
d. 26.17 percent

19. A project required the initial investment of $750,000 on its equipment. It will be depreciated to the book value of $0 after six years. However, the equipment can be sold for $100,000 at the end of the six years. What is the after-tax gain by selling the equipment at the end of the six years if the tax rate is 20%?
a. $75,000
b. $37,000
c. $80,000
d. $53,300

Answer 1