Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are considering two machines, A and B that can be used for the same purpose. Machine A costs $250,000, will reduce costs by $70,000

You are considering two machines, A and B that can be used for the same purpose. Machine A costs $250,000, will reduce costs by $70,000 per year, needs net working capital of $20,000 at time zero which be released at the end of the project, has a 5 year straight line depreciable life and can be sold at the end of the project's life for $50,000. Machine B costs $320,000, will reduce costs by the same $70,000 per year, has net working capital of $40,000 at time zero (also released at the end of its life), has a ten year straight line depreciable life and can be sold at the end of its life for $60,000. Assume that the tax rate is 38% and the discount rate is 10%. What are the after tax salvage valuds for project A and B at the end of their lives? Don't include the annual operating cash flows in this calculation, just the salvage value plus or minus any tax benefit or liability.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Finance questions

Question

If you completed the Excel track, what is the Significance F value?

Answered: 1 week ago

Question

Describe in plain English what the results of this t-test mean.

Answered: 1 week ago