## What is the after-tax cash flow from the salvage value, Financial Accounting

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Morgado Inc. has provided the following data to be used in evaluating a proposed investment project:
Initial investment \$130,000
Annual cash receipts \$78,000
Life of the project 6 years
Annual cash expenses \$43,000
Salvage value \$13,000

The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 5 years without any reduction for salvage value. The company uses a discount rate of 19%.

1. When computing the net present value of the project, what are the annual after-tax cash receipts? A. \$39,000 B. \$13,650 C. \$54,600 D. \$23,400

2. When computing the net present value of the project, what are the annual after-tax cash expenses? A. \$12,900 B. \$30,100 C. \$55,900 D. \$30,000

3. By how much does the depreciation deduction reduce taxes each year in which the depreciation deduction is taken? A. \$6,500 B. \$15,167 C. \$18,200 D. \$7,800

4. When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year? A. \$9,100 B. \$3,900 C. \$13,000 D. \$0

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