Biebee Inc. in Citokee City is a large toy manufacturing companies. It needs a local partner to supply it with 130,000 box of merchandise per year to support its marketing plan over the next four years. As an experienced handcraft producers, Rely Co. wants to bid on the contract. To conduct this project, Rely Co. needs to buy equipment necessary to start production that will cost it $765,000. This equipment will be depreciated to zero using a straight-line method over the project’s life. After four years, it is estimated that this equipment can be sold for $324,000 (before tax). Moreover, the fixed production costs will be $190,000 per year and the variable production costs should be $8.20 per box. Rely Co. will also need an initial investment in the net working capital of $59,500, all of which will be recovered when the project ends. The corporate tax rate in the state is 24 percent. Rely Co. wants to get a required return of 14.7 percent from this project.

How much is the after-tax salvage of the equipment at the end of year 4?

Answer rating: 100% (QA)

AfterTax Salvage Value Calculation We can find the aftertax salvage value of the equipment at the en... View the full answer