Pear Orchards is evaluating a new project that will require equipment of $247,000. The equipment will...

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Finance

Pear Orchards is evaluating a new project that will requireequipment of $247,000. 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 $65,800. However, the company plans to keep the equipment for adifferent project in another state. The tax rate is 35 percent.What aftertax salvage value should the company use when evaluatingthe current project?
Multiple Choice
$73,891
$42,682
$65,800
$57,709
$0

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3.6 Ratings (549 Votes)

First of all we shall calculate the depreciation of equipment for four years since after that the company plans to shut down the plant and we have to find the salvage value in relation to evaluating the current project Year See Answer

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Pear Orchards is evaluating a new project that will requireequipment of $247,000. 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 $65,800. However, the company plans to keep the equipment for adifferent project in another state. The tax rate is 35 percent.What aftertax salvage value should the company use when evaluatingthe current project?Multiple Choice$73,891$42,682$65,800$57,709$0