Question: Pear Orchards is evaluating a new project that will require equipment of $255,000. The equipment will be depreciated on a 5-year MACRS schedule. The annual

Pear Orchards is evaluating a new project that will require equipment of $255,000. The equipment will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company plans to shut down the project after 4 years. At that time, the equipment could be sold for $71,000. However, the company plans to keep the equipment for a different project in another state. The tax rate is 40 percent. What aftertax salvage value should the company use when evaluating the current project?

Multiple Choice

  • $0

  • $71,000

  • $44,064

  • $81,774

  • $60,226

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