Question 79 deals with terminal value cash flows for a project. My question is why are taxes not deducted from the sale of equipment at the end of the project. It is fully depreciated so there is no tax shield. Yet the answer adds the entire sale value. thx
Their solution for terminal year cash flow reads:
= Sales Price + NWCInv - t(Sales Price - Book Value)
= 75,000 + 30,000 - .40(75,000 - 0)
Taxes are deducted in the: -.40(75,000 - 0) term
got it thanks!