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Savage Value Considerations

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Three questions in total:

A company just undertook a project that required a $300,000 investment in NOWC, which will be reocovered fully at the end of the project's life in five years. The required equipment will not be depreciated fully and still will have a book value of $100,000. The firms tax rate is 40%. If the salvage value at the end of five years turns out to be $100,000, what will the project's total termination cash flow?

Suppose that in five years, the company actually able to get $150,000 for the equipment, even though it has a book value of only $100,000. What is the project's terminal year cash flow now?

Now suppose the equipment gets sold for $30,000 in five years. What is the project's terminal year cash flow now?

Please provide an excel spreadsheet if possible

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Solution Summary

Response helps in computing the Savage Value Considerations

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Terminal cash flow= Recovery of Working capital + Salvage value of Project

Q1

A company just undertook a project that required a $300,000 investment in NOWC, which will be reocovered fully at the end of the project's life in five years.
The required equipment will not be depreciated fully and still will have a book value of $100,000. The firms tax rate is 40%. If the salvage value at the end of five years turns out to be $100,000, what will the project's total termination cash flow?

Terminal cash flow= Recovery of Working capital + After tax ...

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