A manufacturing company just bought a new piece of equipment for $1.6 million. It is a class 8 asset and so the CCA rate is 22%. The following information is given:   - after-tax annual interest rate = 12%   - corporate tax rate = 32%   - service life = 10 years   - historic depreciation rate = 25%   Calculate the present worth of the equipment's salvage value with tax effects.   Pls solve with details explanation

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A manufacturing company just bought a new piece of equipment for $1.6 million. It is a class 8 asset and so the CCA rate is 22%. The following information is given:

 

- after-tax annual interest rate = 12%

 

- corporate tax rate = 32%

 

- service life = 10 years

 

- historic depreciation rate = 25%

 

Calculate the present worth of the equipment's salvage value with tax effects.

 

Pls solve with details explanation

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