In: Finance
38) You are evaluating a potential investment in equipment. The
equipment's basic price is $138,000, and...
38) You are evaluating a potential investment in equipment. The
equipment's basic price is $138,000, and shipping costs will be
$4,100. It will cost another $20,700 to modify it for special use
by your firm, and an additional $6,900 to install it. The equipment
falls in the MACRS 3-year class that allows depreciation of 33% the
first year, 45% the second year, 15% the third year, and 7% the
fourth year. You expect to sell the equipment for 22,100 at the end
of three years. The equipment is expected to generate revenues of
$131,000 per year with annual operating costs of $67,000. The
firm's marginal tax rate is 25.0%. What is the value of the
after-tax cash flow associated with the sale of the equipment?