Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 11. carlson inc. is evaluating a project in india

11. Carlson Inc. is evaluating a project in India that would require a $5.8 million...

90.2K

Verified Solution

Question

Accounting

image
11. Carlson Inc. is evaluating a project in India that would require a $5.8 million investment today (t = 0). The after-tax cash flows would depend on whether India imposes a new property tax. There is a 50-50 chance that the tax will pass, in which case the project will produce after-tax cash flows of $1,350,000 at the end of each of the next 5 years. If the tax doesn't pass, the after-tax cash flows will be $1.800,000 for 5 years. The project has a WACC of 10.4%. The firm would have the option to abandon the project 1 year from now, and if it is abandoned, the firm would receive the expected $1.35 million cash flow at t = 1 and would also sell the property for $4.45 million at t = 1. If the project is abandoned, the company would receive no further cash inflows from it. What is the value in thousands) of this abandonment option? Do not round intermediate calculations. 1500 1500 1500 1500 a. $99 NPU= (-5800+ 1 ou 1.104 1.104 1.109" b. $70 c. $94 d. $108 NPVAbandonment? - stoot 1350+ 4450 -546.38 1.100 edinte calculations. Jo Tax 1500 l 1.104 1 = 954.26 e. $89 NPVEinal a 954.26+ (-546.38 (50%) 954,26-273,19-681.07

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students