Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful stu

[answerhappygod]

Lander Company Has An Opportunity To Pursue A Capital Budgeting Project With A Five Year Time Horizon After Careful Stu 1 (111.13 KiB) Viewed 11 times

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of equipment needed $260,000 $ 63,000 Working capital needed Repair the equipment in two years. $ 19,500 Annual revenues and costs: Sales revenues $380,000 $195,000 Variable expenses Fixed out-of-pocket operating costs $ 86,000 The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The company's tax rate is 30% and its after-tax cost of capital is 12%. When the project concludes in five years the working capital will be released for investment elsewhere within the company Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Calculate the annual income tax expense for each of years 1 through 5 that will arise as a result of this investment opportunity. 2. Calculate the net present value of this investment opportunity. (Negative amounts should be indicated by a minus sign. Round your final answer to the nearest whole dollar.)