1. A firm purchases equipment for a capital budgeting project. The equipment cost $1,900,000 and its useful life is 8 years. The equipment is expected to be sold for $500,000 at the end of the project's 7 year life. The tax rate is 32%. What is the equipment's after tax salvage value?
340,000
$253,143
$501,500
$416,000
2. A firm is considering a 3 year capital budgeting project with the following forecasted cash flows; Year 1 = $7,300,000 and Year 2 = $9,400,000 and Year 3 = $5,300,000. The firm's weighted average cost of capital (WACC) is 11.27%. What is the project's initial cost if the Net Present Value equals zero?
$22,000,000
$18,400,000
$18,000,000
$17,500,000