Question
Russell Construction is trying to decide whether to purchase a large construction crane. The crane will cost $10,000,000, and will be depreciated to zero over
Russell Construction is trying to decide whether to purchase a large construction crane. The crane will cost $10,000,000, and will be depreciated to zero over the 4 year life of the project. The company has determined that the annual operating cash flow generated by the crane would be $3,790,000, and a competitor has told the company they will buy the crane at the end of Year 4 for $1,000,000. No additional working capital will be needed for the project. Assuming a tax rate of 21%, what is the Year 4 cash flow of the project?
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$11,000,000
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$4,790,000
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$3,869,000
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$4,267,000
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$4,580,000
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