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What is the after-tax salvage value

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Problem - A company just spent $40,000 on a market study to analyze a new three-year expansion project. The project requires an initial fixed asset investment of $4.2 million to buy new machinery. The machinery will be depreciated straight-line to zero over its three-year tax life. The machinery will have a market value of $500,000 at the end of the third year when it will he sold. The project is estimated to generate $3 million in annual sales. With annual costs {excluding depreciation of $135 million. The project requires an initial investment in net working capital of $4001000. The marginal tax rate is 25 percent. What is the after-tax salvage value [ATSV] of the machinery in year 3? Will the ATS?

Reference no: EM133034392

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