Question
Morgado Inc. has provided the following data to be used in evaluating a proposed investment project: Initial investment $300,000 Annual cash receipts $95,000 Life of
Morgado Inc. has provided the following data to be used in evaluating a proposed investment project:
Initial investment | $300,000 |
Annual cash receipts | $95,000 |
Life of the project | 5 year |
Annual cash expenses | $60,000 |
Salvage value | $31,000 |
The company's tax rate is 31%. For tax purposes, the entire initial investment will be depreciated over 8 years without any reduction for salvage value. The company uses a discount rate of 11%.
When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?
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