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Find what is the equipment after-tax net salvage value

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Reference no: EM132495278

a. Payback

Question 1: A project has an initial cost of $55,825, expected net cash inflows of $11,000 per year for 9 years, and a cost of capital of 12%. What is the project's payback period? Round your answer to two decimal places.

b. Operating Cash Flow

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:

Projected sales $25 million

Operating costs (not including depreciation) $9 million

Depreciation $6 million

Interest expense $4 million

Question 2: The company faces a 30% tax rate. What is the project's operating cash flow for the first year (t = 1)? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

c. Net Salvage Value

Question 3: Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $12 million, of which 85% has been depreciated. The used equipment can be sold today for $4.2 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000.

Reference no: EM132495278

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