Whitsitt Inc. has provided the following data to be used in evaluating a proposed investment project: Initial investment $910,000 Annual cash receipts 425,000 Life of the project 7 years Annual cash expenses 230,000 Salvage value 84,000 The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 7 years without any reduction for salvage value. The company uses a discount rate of 16%.
a. What is the depreciation tax shield?
b. What are the annual after-tax cash flows?
c .What is the after-tax cash flow from the salvage value in the final year?
e. What is the net present value of the project?
f. What would the annual soft benefits have to be for the company to accept the project?