The Shell out Corp. owns a piece of petroleum drilling equipment that costs $100,000 and will be

Question:

The Shell out Corp. owns a piece of petroleum drilling equipment that costs $100,000 and will be depreciated in 10 years by double declining balance depreciation, with conversion to straight-line depreciation at the optimal point. Assume no in the depreciation computation and a 34% tax rate. Shell out will lease the equipment to others and each year receive $30,000 in rent. At the end of 5 years, the firm will sell the equipment for $35,000. (Note that this is different from the zero-salvage-value assumption used in computing the depreciation.) What is the after-tax rate of return Shell out will receive from this equipment investment?
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...