CourseLover

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    Devry University
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Category > Business & Finance Posted 14 Dec 2017 My Price 10.00

The Capital Budgeting Decision

This is my first time asking a question, so forgive any errors in proper formatting. I was wondering if I could get some help with this Hola-Kola case that I'm working on. One of the questions I have is shouldn't the terminal value of selling the machines in 5 years be $2,800,000 (since at t=5, accumulated depreciation is now 50m, and therefore the book value of the machines is now $0, so you pay taxes of 30% on the $4,000,000 gain, which is 1,200,000; 4,000,000 - 1,200,000 = 2,800,000 terminal value)? Also, shouldn't annual depreciation just be 10,000,000 since it is assumed the machine is fully depreciated over the 5 years (i.e., zero salvage value) despite the fact it is stated the resale value is estimated to be $4,000,000 (I primarily ask this question because I saw in a previous answer to this question that the tutor subtracted $4,000,000 from the $50,000,000 initial cost, which I didn't believe was correct)?

Thanks you

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CourseLover
(12)
Status NEW Posted 14 Dec 2017 08:12 AM My Price 10.00

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