How much is the salvage value cash flow

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Question - The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm s R&D department. The equipment s basic price is $74,196, and it would cost another $8,244 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $29,678. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,363. The machine would have no effect on revenues, but it is expected to save the firm $32,079 per year in before-tax operating costs, mainly labor. The firm s marginal federal-plus-state tax rate is 21.0% and its cost of capital is 14.0%. How much is the salvage value cash flow for the machinery at the end of project's life?

Reference no: EM132776550

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