The investment is $1,000,000, which is depreciated straight line for 10 years down to a zero salvage

Question:

The investment is $1,000,000, which is depreciated straight line for 10 years down to a zero salvage value. For its 10-year life, the investment will generate annual sales of $800,000 and annual cash operating expenses of $250,000. Although the investment is depreciated to a zero book value, you expect to sell it for $200,000 in 10 years. The marginal income tax rate is 30% and the cost of capital is 10%.

a. What after-tax net cash flows are expected?

b. What is the NPV of the investment?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...