Question
Project: new line of stoves The plant and equipment required for producing the new line of stoves costs $100,000 (today) and will be depreciated down
Project: new line of stoves The plant and equipment required for producing the new line of stoves costs $100,000 (today) and will be depreciated down to zero over 20 years using straight-line depreciation. The plant and equipment is sold for $50,000 at the end of 12 years. Net working capital increases by $20,000 at the beginning of the project (year 0) and it is reduced back to its original level in the final year. The tax rate is 20 percent and the discounting rate for the project is 10%. 1. What is the book value for the plant at equipment at the end of year 12? 2. What is the after-tax cash flow of the plant and equipment at disposal (salvage)?
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