Question
The Mobile Oil Company has just purchased an asset they intend to use in their business. The machine has a cost of $100m and
The Mobile Oil Company has just purchased an asset they intend to use in their business. The machine has a cost of $100m and they intend to depreciate this for 10 years straight line. The taxation office has determined that this be depreciated over 13 years straight line however the accountant at Mobile has stated that 10 years must be used for any calculations. The project they are undertaking will last 6 years and the asset will be sold at that time for $50m. Calculate the after-tax salvage CF in Year 6? Assume a 15% tax rate. Show all Workings.
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