Pear Orchards is evaluating a new project that will require equipment of $237,000. The equipment will...

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Pear Orchards is evaluating a new project that will requireequipment of $237,000. The equipment will be depreciated on a5-year MACRS schedule. The annual depreciation percentages are20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and11.52 percent, respectively. The company plans to shut down theproject after 4 years. At that time, the equipment could be soldfor $59,300. However, the company plans to keep the equipment for adifferent project in another state. The tax rate is 40 percent.What after tax salvage value should the company use when evaluatingthe current project?

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Initial Equipment Cost 237000 MACRS Depreciation 20 32 1152 1152 Year 1 Initial Value Initial Cost 237000 Depreciation 20 Depreciation Expense 02 x See Answer

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Pear Orchards is evaluating a new project that will requireequipment of $237,000. The equipment will be depreciated on a5-year MACRS schedule. The annual depreciation percentages are20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and11.52 percent, respectively. The company plans to shut down theproject after 4 years. At that time, the equipment could be soldfor $59,300. However, the company plans to keep the equipment for adifferent project in another state. The tax rate is 40 percent.What after tax salvage value should the company use when evaluatingthe current project?