What would after-tax cash flow be from equipment sale

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1. Today, Gomi Waste Disposal purchased a piece of equipment for 210,000 dollars that will be depreciated to 90,000 dollars over 8 years using straight-line depreciation. What would the after-tax cash flow be from the equipment sale if the equipment is sold in 9 years for 110,000 dollars and the tax rate is 10 percent?

2. Middlefield Motors is evaluating project Z. The project would require an initial investment of 57,500 dollars that would be depreciated to 6,500 dollars over 7 years using straight-line depreciation. The first annual operating cash flow of 24,000 dollars is expected in 1 year, and annual operating cash flows of 24,000 dollars are expected each year forever. Middlefield Motors expects the project to have an after-tax terminal value of 306,500 dollars in 3 years. The tax rate is 30 percent. What is (X+Y)/Z if X is the project’s relevant expected cash flow in year 3, Y is the project’s relevant expected cash flow in year 4, and Z is the project’s relevant expected cash flow in year 2? Round your answer to 2 decimal places (for example, 2.89, 0.70, or 1.00).

Reference no: EM131891606

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