A canadian airline biggles air just bought a new plane for, Ask an Expert

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A Canadian airline, Biggles Air, just bought a new plane for five million dollars. It’s a Class 9 asset, which means that Revenue Canada considers it to depreciate at 25% per annum. However, in reality the plane is wearing out, and losing value, at 35% per annum, and the salvage price Biggles will be able to get for it reflects this depreciation rate. Biggles’s after-tax MARR is 10% and the corporate tax rate is 40%.

What is the after-tax present worth of the salvage price Biggles Air can expect to get for the plane when they sell it in five years time, taking into account the terminal loss?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91584198

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