Problem
A project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of 120,000 per year for two years (i.e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 30%. The assets will depreciate using the MACRS - 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 12%. Assume that the asset can sell for book value at the end of the project. Calculate the NPV of the project (approximately). Based on your results, explain in a one page write up whether or not you would accept or reject the investment.
In addition to the required text, provide at least two scholarly references to support your paper.
The response must include a reference list. One-inch margins, double-space, Using Times New Roman 12 pnt font and APA style of writing and citations.