You obtain the following data for Year 1: Revenue = $43; Costs = $30; Depreciation = $3; Tax rate = 30%. Calculate the free cash flow appropriate for an NPV analysis discounting at the after-tax WACC for the project for Year 1.

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You obtain the following data for Year 1: Revenue = $43; Costs = $30; Depreciation = $3; Tax rate = 30%. Calculate the free cash flow appropriate for an NPV analysis discounting at the after-tax WACC for the project for Year 1.

a.$13
b.$10
c.$16
d.$7

EXPERT ANSWER

Revenue , r = $43

cost , c = $30

depreciation , d = $3

tax rate , t = 30% =0.3

free cash flow = [(r-c-d)*(1-t)] +d = [(43-30-3)*(1-0.3)] + 3 = $10

hence the correct option is b) $10