Morgado Inc. has provided the following data to be used in evaluating a proposed

Question

Morgado Inc. has provided the following data to be used in evaluating a proposed investment project:

Initial investment $290,000
Annual cash receipts $94,000
Life of the project 9 year
Annual cash expenses $59,000
Salvage value $30,000

The company's tax rate is 30%. For tax purposes, the entire initial investment will be depreciated over 7 years without any reduction for salvage value. The company uses a discount rate of 10%.

When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year?

$30,000
$9,000
$21,000
$0

Explanation / Answer

When computing the net present value of the project, what is the after-tax cash flow from the salvage value in the final year? $30,000

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