Schroeder Electronics Is Considering a Project Which Will Require the Purchase

question 85

Multiple Choice

Schroeder Electronics is considering a project which will require the purchase of $5 million in new equipment. The equipment will be depreciated straight-line to a zero book value over the 5-year life of the project. Schroeder's expects to sell the equipment at the end of the project for 10% of its original cost. Annual sales from this project are estimated at $2.3 million. Net working capital equal to 10% of sales will be required to support the project. All of the net working capital will be recouped at the end of the project. Schroeder desires a 12% rate of return on this project. The tax rate is 40%. What is the amount of the after-tax salvage value of the equipment?

• A) $134,000
• B) $150,000
• C) $195,400
• D) $250,000
• E) $300,000

---

Definitions:

Risks

The potential for experiencing harm, loss, or adverse effects in a given situation or for a specific condition.

Common Side Effects

Typical or frequently encountered undesirable effects associated with taking a particular medication or undergoing a specific treatment.

Obesity Drugs

Medications prescribed to assist in the reduction of excessive body weight or to manage obesity.

Thin Ideal

The cultural belief or societal standard that thinness is a desirable attribute, particularly in women, which can influence behavior and self-image.