What is the equipment net after-tax salvage value

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Question 1 - Based on the benefit-cost ratio (BCR) rule, should a project with the following cash flows be accepted if the discount rate is 8%?

Year Cash Flow

0 -$18,600

1 $10,000

2 $7,300

3 $1,100

Why or why not?

a. Yes; because the BCR is 0.989.

b. Yes; because the BCR is 0.881.

c. No; because the BCR is 0.989.

d. No; because the BCR is 0.881.

Question 2 - Bing Services is now in the final year of a project. The equipment originally cost $20,000, of which 80% has been depreciated. Bing can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment's net after-tax salvage value? (If the equipment's final market value is less than its book value, Bing will receive a tax credit as a result of the sale).

a. $1,200

b. $3,200

c. $5,200

d. Neither of the above

Reference no: EM132780476

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