Paper Company Has a Tax Rate of 40% and a Required

Multiple Choice

Paper Company has a tax rate of 40% and a required rate of return of 10%.Depreciation expense relating to operating equipment is $80,000 per year.The asset has a five year life.The present value of one for five years at 10% is 0.6209.The present value of an ordinary annuity of one for five years at 10% is 3.7908.What is the present value of the after-tax cash flows from the annual depreciation expense over the life of the equipment?

A) $0
B) $19,869
C) $80,000
D) $121,306