Question
please help A) Karsted Air Services is now in the final year of a project. The equipment originally cost $24 million, of which 100% has
please help
A) Karsted Air Services is now in the final year of a project. The equipment originally cost $24 million, of which 100% has been depreciated. Karsted can sell the used equipment today for $7 million, and its tax rate is 25%. What is the equipment's after-tax salvage value? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Round your answer to the nearest dollar.
B)
Charlene is evaluating a capital budgeting project that should last for 4 years. The project requires $425,000 of equipment and is eligible for 100% bonus depreciation. She is unsure whether immediately expensing the equipment or using straight-line depreciation is better for the analysis. Under straight-line depreciation, the cost of the equipment would be depreciated evenly over its 4-year life (ignore the half-year convention for the straight-line method). The company's WACC is 12%, and its tax rate is 30%.
What would the depreciation expense be each year under each method? Enter your answers as positive values. Round your answers to the nearest dollar.
Year | Scenario 1 (Straight-Line) | Scenario 2 (Bonus Depreciation) |
0 | $ | $ |
1 | $ | $ |
2 | $ | $ |
3 | $ | $ |
4 | $ | $ |
Which depreciation method would produce the higher NPV? -Select-Straight-LineBonus DepreciationItem 11 How much higher would the NPV be under the preferred method? Do not round intermediate calculations. Round your answer to the nearest dollar.
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