What is the aftertax salvage value of the asset

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1. A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $109,397. In year 2, depreciation will be $100,000 and earnings are expected to be $245,664. Assume the required return is 10%. What is the value of this project?

2. An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page 277), for tax purposes. The asset has an acquisition cost of $23937000 and will be sold for $3934000 at the end of the project. If the tax rate is 0.39, what is the aftertax salvage value of the asset ?

Reference no: EM132012438


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