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(Solution Download) An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purpos


 

 

 

 

 

 

 

An asset used in a four-year project falls in the five-year

 

MACRS class (MACRS Table) for tax purposes. The asset has an

 

acquisition cost of $7,500,000 and will be sold for $1,790,000 at

 

the end of the project.

 

 

  

 

 

 

 

 

 

 

 

 

 

Required:

 

If the tax rate is 34 percent, what is the aftertax salvage

 

value of the asset? (Do not round

 

intermediate calculations. Round your answer to 2

 

decimal places (e.g., 32.16).)

 

 

  

 

 

 

 

 

 

 

 

  Aftertax salvage

 

value

 

$

 

  

 

 

table:

 

http://lectures.mhhe.com/connect/0073382469/Images/macrs_table.jpg

 

 

 

 

 

 

 

 

Cochrane, Inc., is considering a new three-year expansion

 

project that requires an initial fixed asset investment of

 

$2,520,000. The fixed asset will be depreciated straight-line to

 

zero over its three-year tax life, after which time it will be

 

worthless. The project is estimated to generate $2,290,000 in

 

annual sales, with costs of $1,280,000. Assume the tax rate is 40

 

percent and the required return on the project is 7 percent.

 

 

 

 

 

 

 

 

 

 

 

Required:

 

What is the projectAc??cs NPV? (Do not

 

round intermediate calculations. Negative amount should be

 

indicated by a minus sign. Enter your answer in dollars, not

 

millions of dollars (e.g., 1,234,567). Round your answer to 2

 

decimal places (e.g., 32.16).)

 

 


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