Marker Sail Company plans to purchase $4.5 million of equipment in the not-too-distant future. The equipment will be depreciated by the optional straight-line method over the MACRS life of 5 years. Marker is subject to a 30% income tax rate.
The company's accountant is about to perform a net-present-value analysis, assuming a 10% after-tax hurdle rate.

Required:
A. Determine the discounted cash flows that would be reflected in the analysis in year 0 and year 1.
B. Determine the discounted cash flow that would be reflected in the analysis in year 6, assuming that Marker sells the equipment for $450,000,

Question

Marker Sail Company plans to purchase $4.5 million of equipment in the not-too-distant future. The equipment will be depreciated by the optional straight-line method over the MACRS life of 5 years. Marker is subject to a 30% income tax rate.
The company's accountant is about to perform a net-present-value analysis, assuming a 10% after-tax hurdle rate.
  
Required:
A. Determine the discounted cash flows that would be reflected in the analysis in year 0 and year 1.
B. Determine the discounted cash flow that would be reflected in the analysis in year 6, assuming that Marker sells the equipment for $450,000,

Quizplus · Accepted Answer

The Answer of Marker Sail Company plans to purchase $4.5 million of equipment in the not-too-distant future. The equipment will be depreciated by the optional straight-line method over the MACRS life of 5 years. Marker is subject to a 30% income tax rate.
The company's accountant is about to perform a net-present-value analysis, assuming a 10% after-tax hurdle rate.
  
Required:
A. Determine the discounted cash flows that would be reflected in the analysis in year 0 and year 1.
B. Determine the discounted cash flow that would be reflected in the analysis in year 6, assuming that Marker sells the equipment for $450,000,

Marker Sail Company Plans to Purchase $4