Wheel Industries is considering a three-year expansion project, Project A. The p

Question

Wheel Industries is considering a three-year expansion project, Project A. The project requires an initial investment of $1.5 million. The project will use the straight-line depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year before tax and has additional annual costs of $600,000. The Marginal Tax rate is 35%. D. Calculate the after tax cash flows for the projec for each year. Explain the methods used in your calculations.

Explanation / Answer

Depreciation = Cost of the asset

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