You are evaluating a potential investment in equipment. The equipment's basic price is $126,000, and shipping costs will be $3,800. It will cost another $18,900 to modify it for special use by your firm, and an additional $6,300 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 23,300 at the end of three years. The equipment is expected to generate revenues of $115,000 per year with annual operating costs of $61,000. The firm's marginal tax rate is 30.0%. What is the value of the after-tax cash flow associated with the sale of the equipment? ANSWER CHOICES $8,715 $16,310 $12,450 $19,565 $7,115 Correct answer is $19,565. Need help with the steps to solve the problem
You are evaluating a potential investment in equipment. The equipment's basic price is $126,000, and shipping costs will be $3,800. It will cost another $18,900 to modify it for special use by your firm, and an additional $6,300 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 23,300 at the end of three years. The equipment is expected to generate revenues of $115,000 per year with annual operating costs of $61,000. The firm's marginal tax rate is 30.0%. What is the value of the after-tax cash flow associated with the sale of the equipment? ANSWER CHOICES $8,715 $16,310 $12,450 $19,565 $7,115 Correct answer is $19,565. Need help with the steps to solve the problem
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
Related questions
Question
You are evaluating a potential investment in equipment. The equipment's basic price is $126,000, and shipping costs will be $3,800. It will cost another $18,900 to modify it for special use by your firm, and an additional $6,300 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 23,300 at the end of three years. The equipment is expected to generate revenues of $115,000 per year with annual operating costs of $61,000. The firm's marginal tax rate is 30.0%. What is the value of the after-tax cash flow associated with the sale of the equipment?
ANSWER CHOICES
$8,715
$16,310
$12,450
$19,565
$7,115
Correct answer is $19,565.
Need help with the steps to solve the problem
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