Question
1A. Strong Steel, Inc. is considering launching a new product in the coming year. This new 4-year project will cost $7,500,000 of capital investments at
1A. Strong Steel, Inc. is considering launching a new product in the coming year. This new 4-year project will cost $7,500,000 of capital investments at time zero, which will be depreciated over the 4 year period based on the 3-year MACRS. Upon the project termination in year 4, the company expects to sell the assets for $760,000 salvage value. The firm has a 40 percent tax rate. What is the after-tax salvage value of the asset at year 4?
A. $337,440 | |||||||||
B. $456,000 | |||||||||
C. $629,280 | |||||||||
D.$259,920
1B. Amazing Tires is considering opening a new facility to meet demand for the next 5 years. It will require initial capital expenditures of $5 million at time zero to open the facility. After 5 years the facility will be sold, and the after tax salvage value is expected to be $0.8 million. The initial investment in NOWC will be $710,000. Amazing expects to recover its NOWC investments at the end of the project. Operating cash flows of $1 million per year are expected for each year of the 5 year project. What is the Total Cash flow for the last year of the project (Year 5)? Question 1B. options:
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