What is the equipment after-tax net salvage value


Question 1. Johnson Industries is considering an expansion project. The necessary equipment could be purchased for 9 million, and the project would also require an initial 3 million investment in net operating working capital. The company's tax rate is 40 percent. What is the projects initial investment outlays?

Question 2. Nixon Communications is trying to estimate the first-year operating cash flow (at t =1) for a proposed project. The financial staff has collected the following information:

Projected Sales 10 million
Operating cost (not including depreciation) 7 million
Depreciation 2 million
Interest expense 2 million

The company faces a 40 percent tax rate. What is the project's operating cash flow for the first year (t = 1)?

Question 3. Carter Air Lines is now in the terminal year of a project. The equipment originally cost 20 million, of which 80 percent has been depreciated. Carter can sell the used equipment today for another airline for 5 million, and its tax rate is 40 percent. What is the equipment after-tax net salvage value?

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Finance Basics: What is the equipment after-tax net salvage value
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