Question

In: Finance

a. Expo Restaurant is considering the purchase of a $4,500,000 flat top grill. The grill has...

a. Expo Restaurant is considering the purchase of a $4,500,000 flat top grill. The grill has an economic life of 6 years and will be fully depreciated using the straight-line method. The grill is expected to produce 250,000 tacos per year for the next 6 years, with each costing $2 to make and priced at $6. Assume the discount rate is 7% and the tax rate is 21%. The restaurant expects the market value of the grill to be $600,000, 6 years from now.  

Calculate the book value of the grill at the end of year 4. (Round to 2 decimals)

b. annual depreciation value for the grill?

c. after-tex salvage value at the end of year 6?

Solutions

Expert Solution

Calculate the book value of the grill at the end of year 4.
=4500000/6*2
=1500000.00

b. annual depreciation value for the grill?
=4500000/6
=750000.00

c. after-tex salvage value at the end of year 6?
=600000*(1-21%)
=474000.00


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