Morgado Inc. has provided the following data to be used in evaluating a proposed investment project:
|
Initial investment |
$300,000 |
|
Annual cash receipts |
$95,000 |
|
Life of the project |
5 year |
|
Annual cash expenses |
$60,000 |
|
Salvage value |
$31,000 |
The company’s tax rate is 31%. For tax purposes, the entire initial investment will be depreciated over 8 years without any reduction for salvage value. The company uses a discount rate of 11%.
When computing the net present value of the project, what is the after tax cash flow from the salvage value in the final year?