Paxton Kingsley the chief executive officer of Kingsley

Corpora
Paxton Kingsley, the chief executive officer of Kingsley Corporation, has assembled his top
advisers to evaluate an investment opportunity. The advisers expect the company to pay
$400,000 cash at the beginning of the investment and the cash inflow for each of the following
four years to be the following.Mr. Kingsley agrees with his advisers that the company should
use the discount rate (required rate of return) of 12 percent to compute net present value to
evaluate the viability of the proposed project.Requireda. Compute the net present value of the
proposed project. Should Mr. Kingsley approve the project?b. Wilma Pate, one of the advisers,
is wary of the cash flow forecast and she points out that the advisers failed to consider that the
depreciation on equipment used in this project will be tax deductible. The depreciation is
expected to be $80,000 per year for the four-year period. The company’s income tax rate is 30
percent per year. Use this information to revise the company’s expected cash flow from this
project.c. Compute the net present value of the project based on the revised cash flow forecast.
Should Mr. Kingsley approve theproject?
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Paxton Kingsley the chief executive officer of Kingsley Corpora
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