New equipment would cost $175,000, and it is expected to save $35,000 pet year. It has a

Question:

New equipment would cost $175,000, and it is expected to save $35,000 pet year. It has a 10-year life and a of $20,000. The target after-tax ROI is 8%. Straight-line depreciation is used. An effective combined tax rate of 45% exists. Does the investment meet the target ROI? What is the actual after-tax ROI?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...