Question

Pear Orchards is evaluating a new project that will require equipment of $227,000. The equipment will...

Pear Orchards is evaluating a new project that will require equipment of $227,000. The equipment will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company plans to shut down the project after 4 years. At that time, the equipment could be sold for $52,800. However, the company plans to keep the equipment for a different project in another state. The tax rate is 34 percent. What aftertax salvage value should the company use when evaluating the current project?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Calculate the after tax salvage value as follows:

Therefore, the after tax salvage value is $48,184.70.

Formulas:

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company is evaluating a new 4-year project. The equipment necessary for the project will cost...
A company is evaluating a new 4-year project. The equipment necessary for the project will cost $3,800,000 and can be sold for $745,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 34 percent. What is the aftertax salvage value of the equipment?
Brummitt Corp., is evaluating a new 4-year project. The equipment necessary for the project will cost...
Brummitt Corp., is evaluating a new 4-year project. The equipment necessary for the project will cost $2,800,000 and can be sold for $313,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment?
King Nothing is evaluating a new 6-year project that will have annual sales of $425,000 and...
King Nothing is evaluating a new 6-year project that will have annual sales of $425,000 and costs of $293,000. The project will require fixed assets of $525,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 35 percent. What is the operating cash flow for Year 3?
A company is considering a new 6-year project that will have annual sales of $207,000 and...
A company is considering a new 6-year project that will have annual sales of $207,000 and costs of $128,000. The project will require fixed assets of $247,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2?
A company is considering a new 6-year project that will have annual sales of $198,000 and...
A company is considering a new 6-year project that will have annual sales of $198,000 and costs of $122,000. The project will require fixed assets of $241,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2? Multiple Choice $65,892 $63,817 $76,381 $52,061 $59,599
ABC Company purchased a new machinery 4 years ago for $68,721. Today, it is selling this...
ABC Company purchased a new machinery 4 years ago for $68,721. Today, it is selling this equipment for $20,792. What is the after-tax salvage value if the tax rate is 23 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
Phil's Diner purchased some new equipment two years ago for $118,679. Today, it is selling this...
Phil's Diner purchased some new equipment two years ago for $118,679. Today, it is selling this equipment for $80,947. What is the after-tax cash flow from this sale (in $) if the tax rate is 28 percent? The equipment falls in 5-year MACRS class. The MACRS allowance percentages are as follows, commencing with year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
Phil's Diner purchased some new equipment two years ago for $102,274. Today, it is selling this...
Phil's Diner purchased some new equipment two years ago for $102,274. Today, it is selling this equipment for $81,604. What is the after-tax cash flow from this sale (in $) if the tax rate is 35 percent? The equipment falls in 5-year MACRS class. The MACRS allowance percentages are as follows, commencing with year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
The Blue Lagoon is considering a project with a five-year life. The project requires $32,000 of...
The Blue Lagoon is considering a project with a five-year life. The project requires $32,000 of fixed assets that are classified as five-year property for MACRS. Variable costs equal 67 percent of sales, fixed costs are $12,600, and the tax rate is 34 percent. What is the operating cash flow for Year 4 given the following sales estimates and MACRS depreciation allowance percentages? Year 1 2 3    4    5 Sales $ 32,000 $ 34,500   $ 35,600 $ 38,900...
The equipment would cost $162,000 and would be classified as five-year property for MACRS. The equipment...
The equipment would cost $162,000 and would be classified as five-year property for MACRS. The equipment will be sold for $20,000 at the end of the project. Taking on the project would require the company add $10,000 in net working capital. Variable costs equal 67 percent of sales, fixed costs are $5,600, and the tax rate is 21 percent. Willie's paid a consultant $500 to determine the effect on sales over the five years if the equipment is purchased. The...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT