What is the aftertax salvage value of equipment

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Reference no: EM132040817

1. Power Manufacturing has equipment that it purchased 4 years ago for $2,000,000. The equipment was used for a project that was intended to last for 6 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $290,000 today. The company's tax rate is 34 percent. What is the aftertax salvage value of the equipment?

$418,067

$388,600

$161,933

$290,000

2. Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 6,100 pairs of sunglasses at a price of $156 each and a variable cost of $108 each. The equipment necessary for the project will cost $320,000 and will be depreciated on a straight-line basis over the 9-year life of the project. Fixed costs are $220,000 per year and the tax rate is 40 percent. How sensitive is the operating cash flow to a $1 change in variable costs per pairs of sunglasses?

$3,660

$4,067

$3,294

$3,660

Reference no: EM132040817

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