Your company bought a new distribution facility 3 years ago for $9 million. Your company currently has
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Question:
(A) Sell the facility today for $7 million (before taxes).
(B) Alternatively, if the facility is not sold, it will produce earnings before depreciation and taxes of $2 million for the next 4 years.
The tax rate for your company is 34%. Depreciation for tax purposes of a new distribution facility
is 6 years straight line and the discount rate is 10%.
When you purchased the new facility you had to increase the working capital by $1 million.
This $1 million will return to the firm once the facility is sold.
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date: