Question
Southwest currently has two surplus boeing 737-300 jets which are not used for anything and are parked on a runway in Arizona. The jets were
Southwest currently has two surplus boeing 737-300 jets which are not used for anything and are parked on a runway in Arizona. The jets were bought for $45 million each 11 years ago. Jets of the same model, age, and condition currently trade for $5 million in the used jet market. Both jets would require a refurbishment costing $1 million. THe jets and the refurbishment fall into the 7-year MACRS category.
Both planes can be safely operated for another 10 years, after which they will be sold for parts. The value of parts will be $2 million. You need to put up $0.5 million to finance the day-to-day operations of the jet, such as paying staff on time, paying bills from the catering company, airport landing fees etc., before launch. An additional $20,000 is needed every year until year 10, when all outlays will be recouped.
From above informaiton, how to find after-salvage value of plane?
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