Question

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $780,751. The fixed asset will be depreciated straight-line to 61,698 over its 3-year tax life, after which time it will have a market value of $105,821. The project requires an initial investment in net working capital of $58,786. The project is estimated to generate $171,741 in annual sales, with costs of $84,194. The tax rate is 0.24 and the required return on the project is 0.1. What is the aftertax salvage value in year 3? (Make sure you enter the number with the appropriate +/- sign)

Answer 1

Market value =		$                   105,821.00
Book value =		$                     61,698.00
Gain on sales =		$                     44,123.00
Tax on gain @ 24%		$                     10,589.52
Post tax salvage value		$                     95,231.48
answer =		$                     95,231.48