Assume the terminal value of an investment is $27,500. This purchase has a cost of $50,000...
Assume the terminal value of an investment is $27,500. This purchase has a cost of $50,000 with a marginal tax rate of 13%. This investment has an annual depreciation of $4,000. It is required at least a 10% pretax rate of return on capital. What is the present value of after-tax terminal value after 4 years?
Homework Answers
value after 4 years = 50,000 - 4,000*4 = 34,000
loss = 34,000 - 27,500 = 6,500
tax advantage = 013 * 6500 = 845
after-tax terminal value = 27,500 + 845 = 28,345
PV of after tax terminal value = 28,345/1.10^4 = 19,360.02
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