1. Power Manufacturing has equipment that it purchased 4 years ago for $2,000,000. The equipment was used for a project that was intended to last for 6 years. However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $290,000 today. The company's tax rate is 34 percent. What is the aftertax salvage value of the equipment?
$418,067
$388,600
$161,933
$290,000
$290,000
2. Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 6,100 pairs of sunglasses at a price of $156 each and a variable cost of $108 each. The equipment necessary for the project will cost $320,000 and will be depreciated on a straight-line basis over the 9-year life of the project. Fixed costs are $220,000 per year and the tax rate is 40 percent. How sensitive is the operating cash flow to a $1 change in variable costs per pairs of sunglasses?
$3,660
$4,067
$3,294
$3,294
$3,660