What is the after-tax salvage value

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Reference no: EM131608723

Mahendra & Mahendra, an India conglomerate is investing $10,000 to buy an equipment. The equipment will last five years and will depreciate straight line. The firm hopes to generate revenue of $14,000 every year with an EBIT margin of 40%. The firm would need NWC investment equal to 10% of annual revenue. Estimate the FCF for the project for the first five years.

In the above problem, if the firm hopes to sell the equipment for $2,000 at the end of five years and faces a tax rate of 35%, what is the after-tax salvage value?

Reference no: EM131608723

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