Two friends consider opening a driving range for golfers. They estimate such a range could generate rentals of 20,000 buckets at $3 a bucket in the first year, and expect rentals to grow at 750 buckets a year thereafter. The equipment requirements include ball dispensing machines, the ball pick-up, and the vehicle tractor that will cost $2,000, $7,000, and $9,000 respectively. The net working capital is $3,000 to start with, and is expected to grow at 5% per year. The annual fixed operating cost for balls and baskets will initially be $3,000 and is expected to grow at 5% per year. The fixed costs of leasing the land and its upkeep will be $53,000 per year.All is 5-year MACRS property. All is expected to have a salvage value of 10% of cost after 6 years. please could you be so nice and show me how you calculate after - tax salvage, answer is $1530.
The relevant tax rate is 15% and the required return is also 15%.
The project is expected to be evaluated over a 6 year life.