Allison's is expected to have annual free cash flow of $62,000, $65,400, and $68,900 for the next three years, respectively. Aft
1 answer:
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Answer:
A) NPV= - $428,888.89 B) Company would break Even if g = 5.68%
Explanation:
Hi, we have to bring to present value all the inflows and outflows of cash, this is the formula to use and the math of it.
The question says that "at what constant growth rate would the company just break even..." and well, a NPV=0 is not precisely break even, actually, it means that the company is obtaining exactly what is asking for any investment, but let´s assume that the question was, what should the growth rate be for the company to accept this project?. So we have to solve the first equation for "g", that is:
So the constant growth rate has to be at least 5.68% for the company to accept this project (NPV=0)
Best of luck
Answer:
After tax salvage value $1,278,852.8
Explanation:
MARCS five years class:
after four years we will have depreicate:
0.2 + 0.32 + 0.192 + 0.1152 = 0,8272
(Data from the attached MACRS)
tax basis of the asset:
6,170,000 x ( 1 - 0.8272) = 1.066.176
We will be taxed for the difference between the basis and the salvage value:
1,370,000 - 1,066,176 = 303,824 taxable gain:
303,824 x 30% = 91,147.2
After tax salvage value:
salvage valeu - income tax expense
1,370,000 - 91,147.2 = 1,278,852.8
