# Calculate Income Tax Payable And After Tax Cash Flow For A Project

Question

Alberta Energy Crop. Intends to start generating electricity using its recently installed wind turbines located of Edmonton. The electricity generated by the turbines is sold under contract to RBC Ind. for \$M per year. The yearly operating and Maintenance costs of the turbines are estimated to be \$850,000.Inital cost of purchasing and installing the turbines is \$6,000,000.The income tax rate is 30%.The CCA rate for wind turbine is 20%.(Note that CCA is available at one half of the normal rate in the year in which tahe asset is acquired) MARR (the minimum attractive rate of return) for Alberta Energy Crop. Is 10%.Salvage values are zero. The Project life is 5-years.

Determine:

a) The income tax payable in three of the project if M = 2,600,000

b) The after tax cash flow in year three of the project if M = 2,600,000

c) The rate of return of the after tax cash flow for this project if M = 2,600,0000

d) The minimum value of M that would still make this project economically acceptable

Summary

The question belongs to Finance and it discusses about calculating income tax payable, after tax cash flow, rate of return of after tax cash flow for a project.

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