You purchased equipment in 2017 for $120,000 plus itcosts $20,000 to have it delivered and installed. You alsotraded yoour old computer worth $20,000. The old CCAhalf-year rule still applied. Based on past information,you believe that the equipment will have a salvage valueof $19,000 in 6 years. The company's marginal tax rate is40%. If the asset's CCA rate is 20% and the requiredreturn on this project is 10%, what is the present value ofSalvage?Answer:

The term "present value of the salvage" describes the current value of a future monetary sum, more…

Answered: 40%. If the asset's CCA rate is 20% and…

40%. If the asset's CCA rate is 20% and the required return on this project is 10%, what is the present value of Salvage?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

You purchased equipment in 2017 for $120,000 plus it
costs $20,000 to have it delivered and installed. You also
traded yoour old computer worth $20,000. The old CCA
half-year rule still applied. Based on past information,
you believe that the equipment will have a salvage value
of $19,000 in 6 years. The company's marginal tax rate is
40%. If the asset's CCA rate is 20% and the required
return on this project is 10%, what is the present value of
Salvage?
Answer:

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