What is the aftertax salvage value in year three

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Reference no: EM131620900

A. Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $725000. The fixed asset will be depreciated straight-line to 66000 over its 3-year tax life, after which time it will have a market value of $80000. The project requires an initial investment in net working capital of $67000. The project is estimated to generate $204000 in annual sales, with costs of $153000. The tax rate is 0.40 and the required return on the project is 0.10. What is the aftertax salvage value (SVNOT) in year 3? (Make sure you enter the number with the appropriate +/- sign) Your Answer:

B. Geary Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $634000 is estimated to result in $195000 in annual pretax cost savings. The press falls in the MACRS five-year class (Refer to the MACRS table on page 277), and it will have a salvage value at the end of the project of $103000. The press also requires an initial investment in spare parts inventory of $74000, along with an additional $12700 in inventory for each succeeding year of the project. If the shop's tax rate is 0.22 and its discount rate is 0.08, what is the total cash flow in year 4? (Do not round your intermediate calculations.) (Make sure you enter the number with the appropriate +/- sign)

Reference no: EM131620900

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