Problem 10-7 Calculating Salvage Value. X] Calculating aftertax salvage value - Excel ? 5 X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In X Calibri -11 AA % Paste BIU- -A- Cells Editing Alignment Number Conditional Format as Cell Formatting Table Styles Styles Clipboard Font A1 fx A B D E F G H I J 1 2 3 Consider an asset that costs $730,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $192,000. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset? 4 5 6 $ $ 7 8 Costs Pretax salvage value Tax rate Years for depreciation Year asset is sold 730,000 192,000 23% 8 5 9 10 11 12 x 5 Calculating aftertax salvage value - Excel ? - Q FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In X Calibri - 11 AA % H Paste BIU A- Cells Editing Cell Alignment Number Conditional Format as Formatting Table Styles Styles Clipboard Font A1 X fx B E F G H I J $ 7 8 Pretax salvage value Tax rate Years for depreciation Year asset is sold D 192,000 23% 8 5 9 10 11 12 13 Complete the following analysis. Do not hard code values in your calculations. 14 15 Annual depreciation $ 91,250 16 17 Accumulated depreciation $ 456,250 18 19 Book value $ 273,750 20 21 22 Aftertax cash flow Pretax salvage value Taxes Aftertax salvage value 23 24 2 3 Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated on a three-year MACRS schedule. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $210,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? The tax rate is 21 percent. If the required return is 12 percent, what is the project's NPV? 4 5 6 Asset investment $ 7 Estimated annual sales $ 8 Costs $ 9 Net working capital $ 10 Pretax salvage value $ 11 Tax rate 12 Project and asset life 13 Required urn 14 MACRS percentages 15 Year 1 16 Year 2 17 Year 3 18 Sheet1 2,900,000 2,190,000 815,000 300,000 210,000 21% 3 12% 0.3333 0.4445 0.1481 READY 100% Attempt(s) Hint 21 22 Sales 23 Costs 24 Depreciation 25 EBT 26 Taxes 27 Net income 28 29 Fixed asset book value 30 in three years 31 32 Aftertax salvage value 33 Sell equipment 34 Taxes 35 Aftertax cash flow 36 37 Capital spending 38 Net working capital 39 OCF 40 Net cash flow 41 42 NPV 43 Sheet1 o READY E 100% Attempt(s) Hint
