The Ace Company Is Considering Investing in a Piece of Property

Multiple Choice

The Ace Company is considering investing in a piece of property which costs $105,000.The property will return a constant cash flow forever.If the firm's required rate of return is 9 percent and the corporate tax rate is 40 percent,what is the minimum after-tax cash flow that would make the investment acceptable to Ace?

A) $15,942
B) $10,831
C) $9,450
D) $2,375
E) $5,000