BITS Pilani

Pilani Campus

Topic: Planning Construction Equipment

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Why do you need equipment?

➢ Construction equipment plays a significant role in the execution of modern high-

cost time-bound construction projects.

➢ Produces output at an accelerated speed.

➢ Equipment saves manpower (scarce, costly and more demanding day-by-day).

Until almost the twentieth century, one simple tool constituted the primary
earthmoving machine: the hand shovel.

This tool was the principal method by which material was either sidecast or
elevated to load a conveyance, usually a wheelbarrow, or a cart or wagon
drawn by a draft animal.

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Construction Equipment (Why planning is necessary?

➢ Construction management practices that could improve productivity at

the project level can also enhance productivity at an activity level.

➢ However, practices that could improve the productivity of an activity might

not necessarily enhance the productivity of a building project.

➢ For instance, locating cranes in the most appropriate location for the
construction of many work packages can improve the productivity of a
project or group of activities such as concrete, façade, and structural
steel works.

➢ However, positioning a crane in the most suitable position for only one
activity could enhance the productivity of that activity, for instance, façade
work, but might not improve the productivity of other groups of activities
or a project.

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Construction Equipment (Why planning is necessary?

➢ Similarly, procurement of a crane by considering the maximum weight to

be lifted in a single work package can affect the productivity of other work
packages because these work packages might have the heaviest
materials, which the procured crane could not lift.

➢ Thus, focusing on activity-level management practices might not increase

overall project productivity.

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Evolution of Earth-moving equipment:

➢ The late eighteenth-century, the beginnings of the Industrial Revolution, and the
invention of the steam engine promised a practical mode of power for a wide range of
applications, including earthmoving.

➢ The first steam-powered shovel for moving earth was invented by 25-year-old William
S. Otis of Philadelphia, who built a practical working machine in 1838.

➢ The machine earned a patent in 1839; unfortunately, Otis died that year, so he never
profited from what was perhaps one of the three or four most important
developments in the history of earthmoving equipment. Otis’s invention had to
operate on rails, however, and although it was useful in certain applications such as
railroad construction, its lack of mobility limited its flexibility.

➢ Although the steam shovel went through numerous refinements in the nineteenth
century, it remained rail mounted, eventually on standard-gauge railcars.

➢ Not until the first decade of the twentieth century did it begin to achieve its full
potential, when crawler-mounted versions with 360° swing began to appear
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Crawler Excavators https://www.heavyequipmentrentals.com/

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Crawler Excavators

Use for: Mining, landscape grading and trench digging.

Pros: Good for uneven terrain.

Cons: It's slower than a wheeled excavator.

The crawler excavator (also referred to as the standard excavator) is called a crawler
because it runs on two rotating tracks instead of wheels—in much the same way a
tank does.

The crawler uses hydraulic power and although it's slower than a wheeled
excavator, its tracked chassis makes it more stable.

This is what makes the crawler excavator a good choice for steep, rough or muddy
landscapes—The chain wheel system allows it to balance better on uneven terrain.

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Wheeled Excavators

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Wheeled Excavators

Use for: Jobs on flat/hard surfaces.

Pros: It's fast and easy to move on concrete.

Cons: It won't work well in muddy or hilly terrain.

The wheeled excavator is like the crawler (standard) excavator, but, like the name
suggests, it has wheels instead of tracks.

Because the wheeled excavator has less traction than the standard, it's best used on
asphalt or concrete.

While the wheeled excavator is not suited for sites with soft soil or hills and
slopes, it's faster than a crawler when operated on a smooth, hard surface. It's also
easier to maneuver.
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Suction Excavators

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Suction Excavators

Use for: Fragile digging jobs, debris cleanup and underground projects.

Pros: Lessens the chance of damaging the surrounding area or underground utilities.

Cons: The suction pipe is usually only 30 centimeters (one foot) or less in diameter,
making it not applicable for large-scale projects.

Also called vacuum excavators, suction excavators include a suction pipe that
functions as a high pressure-vacuum.

Working in tandem with a built-in water jet, the suction system sucks up soil and
debris fast - at speeds of 200 miles per hour.

Construction companies often utilize suction excavators for jobs that require careful
and precise excavating, as a suction excavator can cut the chance of area damage in
half.

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Long Reach Excavators

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Long Reach Excavators

Use for: Hard-to-reach areas.

Pros: It has a long extendable arm, which makes it easier to excavate from a safe
distance.

Cons: The long arm makes it impossible to excavate in tight spaces.

Like the name suggests, the long reach excavator has a lengthy arm and boom.

The long reach excavator's extendable arm has a range of 40 to 100 feet, making it
possible to reach construction zones that are over 100 feet away horizontally.

This type of excavator is made for jobs where the terrain or construction site prevents
the machine and operator from getting too close, such as demolition projects that are
over a river or lake.

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Hydraulic Shovels

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Hydraulic Shovels

Use for: Mining and heavy digging projects.

Pros: It has a powerful engine and large bucket capacity.

Cons: It's larger than necessary for many jobs.

Also called power shovels, the hydraulic shovel is the most powerful type of
excavator.

While it's most commonly used for mining projects, the hydraulic shovel is suited to
handle any job that requires heavy lifting and hauling of large rocks, minerals and
other heavy objects or materials.

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Dragline Excavators

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Dragline Excavators

Use for: Deep pile driving, harbor construction, surface mining, deep excavation,
road excavator and under-water operations.

Pros: Dragline excavators have a digging depth of 65 meters (213 feet) or more.
Cons: Its large size and inflexible system make it only useable for specific jobs.

The dragline excavator is larger than the standard. More importantly,

it operates differently. The dragline uses a hoist rope system and a dragline to raise
and lower the bucket and drag it toward the driver.

This hoist/dragline system make this excavator ideal for excavating underwater.

https://www.heavyequipmentrentals.com/

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Skid Steers

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Skid Steers

Use for: Site clearing, debris removal and pool clearing.

Pros: Its small size makes it ideal for narrow areas or job sites with limited space.

Cons: Because a skid steer is on wheels instead of a track, it may not perform well
on uneven or muddy, sandy or snowy terrain.

The biggest difference between a skid steer and a standard excavator is that with a
skid steer, the boom and bucket faces away from the driver.

Skid steers are frequently used for small projects and residential work.

https://www.heavyequipmentrentals.com/

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 THANKS FOR THE KIND ATTENTION

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Functional classification of construction equipment

Earthwork Equipment:
➢ Excavation and lifting equipment – backhoes, face shovels, draglines, grabs or
clamshell and trenchers.
➢ Earth cutting and moving equipment – bulldozers, scrapers, front-end loaders
➢ Transportation equipment – tippers dumps truck, scrappers rail wagons and
conveyors.
➢ Compacting and finishing equipment – tamping foot rollers, smooth wheel rollers,
pneumatic rollers, vibratory rollers, plate compressors, impact compactors and
graders.

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Functional classification of construction equipment

Materials Hoisting Plant:

➢ Mobile cranes – crawler mounted, self-propelled rubber tyred, truck mounted
➢ Tower cranes – stationary, travelling and climbing types
➢ Hoists – mobile, fixed, fork-lifts

Concreting Plant & Equipment:

➢ Production equipment – Batching plants, concrete mixers
➢ Transportation equipment – Truck mixers, concrete dumpers
➢ Placing equipments – Concrete pumps, concrete buckets, elevators, conveyors,
hoists, grouting equipments
➢ Pre-casting special equipment – vibrating and tilting tables, battery moulds, surface
finishes equipment, pre-stressing equipment, GRC equipment, steam curing
equipment, shifting equipment, erection equipment
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Functional classification of construction equipment

Concreting Plant & Equipment:

➢ Vibration equipment, repairing and curing equipment
➢ Concrete laboratory testing equipment

Support and Utility Services Equipment:

➢ Pumping equipment
➢ Sewage treatment equipment
➢ Pipeline laying equipment
➢ Power generation and transmission line erection equipment
➢ Compressed air equipment
➢ Heating, Ventilation and air-conditioning (HVAC) equipment
➢ Workshop including wood working equipment

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Special Purpose Heavy Constructed Plant

➢ Aggregate production plant & rock blasting equipment

➢ Hot mix plant and paving equipment
➢ Marine equipment
➢ Large-diameter pipe laying equipment
➢ Piles and pile driving equipment
➢ Coffer dams and caissons equipment
➢ Bridge construction equipment
➢ Railway construction equipment

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Earth factor in Earthwork

➢ The most important factor that determines the suitability of equipment for
earthwork is the earth itself. The process is affected by the ground condition.
➢ Suitability of equipment
➢ The digging effort
➢ The resulting output
➢ Output measurement

Excavating and lifting in soft earth:

a) Deep pits excavation – Clamshell and dragline
b) Shallow pit excavation - Backhoes
c) Ground level excavation - Shovels
d) Shallow trenching – Trenchers, excavators (backhoes)
e) Wet soil excavation – Excavators (dragline or grab)

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Cutting over areas
➢ Short-hauls – Dozers
➢ Long-hauls - Scrappers
Loading and transporting excavated soil:
➢ Loading soil – Loaders, shovels, excavators
➢ Transporting soil – Tippers, dumpers, scrappers.
Digging Effort:
Depends on the nature of soil…

Nature of the soil Digging effort Soil factor

Loam, sand, gravel Easy digging 1.0
Common earth Medium digging 0.85
Stiff clay, soft rock Hard digging 0.67

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Volume conversion

The volume measure varies with the state of the soil.

➢ In-place natural soil
➢ Loose excavated bulk soil
➢ Compacted soil

Nature of the soil Bank volume Loose volume Compacted volume

Common earth 1.00 1.25 0.90
Sand 1.00 1.12 0.95
Clay 1.00 1.27 0.90
Rock (blasted) 1.00 1.50 1.30
Bank volume: The volume of soil in its in-place natural state is Bank Volume

Swell factor is the ratio of loose volume to the bank volume

Shrinkage factor is the ratio of compacted volume to bank volume

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 Equipment output

The equipment capability to perform an assigned earthwork task can best be

determined from the on-site actual trials or can be assessed from its best performance
records of operation under similar site conditions.

Equipment actual hourly output = Actual load/cycle x cycles/hour

Note: The equipment output norms can be derived from the performance data given in
the manufacturer’s manuals.

Optimum output = ideal output x Correction factor

Planned output = Optimum output x Performance factor

Correction factors:
➢ Operating characteristics and site conditions
➢ Excavator swing factor
➢ Earth grade factor
➢ Soil factor
➢ Rolling resistance
➢ Traction factor
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Equipment output

The equipment planned performance at site of work depends upon many situational
factors that influence the output.
➢ Controllable factors
➢ Uncontrollable factors

Assessed Equipment Effective Performance Efficiency

Working Minutes/hour Factor
60 minutes/hour 1.00
55 minutes/hour 0.92
50 minutes/hour 0.83
45 minutes/hour 0.75
40 minutes/hour 0.67

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Equipment output for planning purposes

The soil production (m3) per hour at which the soil is moved can be expressed in
three states.

➢ Unexcavated natural bank cubic metre (BCM)

➢ Distributed swelled loose cubic metre (LCM)
➢ Dense compacted cubic metre (CCM)
The theoretical soil ideal output of an equipment in volume (m3) per hour in loose in
one cycle is generally given in equipment manual (the manufacturer-rated capacity)
or is based on past experience.

Equipment output/hour = Load per cycle x Cycle per hour

This ideal output is based on loose excavated soil. It is multiplied by “job conditions
adjustment and equipment performance factor
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Numerical Problem -

Estimate the hourly production in bulk volume (LCM) of a backhoe with bucket
capacity of 0.96/m3 employed on excavation of a foundation four metres deep in hard
digging soil. The excavated earth is to be loaded in waiting dump trucks, placed at a
swing angle of 75 degrees. The expected performance efficiency is 83%.

Solution:
Ideal output of loose soil in cubic metre (LCM) for an equivalent face shovel of bucket
capacity of 0.96 m3 = 150 LCM (approximate)

Backhoe ideal output using equipment conversion factor of 0.8 operating at optimum
depth = 150 x 0.8 = 120 LCM.

Soil correction factors considered are:

Soil factor for hard digging = 0.67
Load factor for loading into vehicle = 0.80
Swing factor for 75 degrees = 1.05
Correction factor = 0.67 x 0.80 x 1.05 = 0.56

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Numerical Problem -

Performance efficiency = 0.83 (assumed)

Expected output/hour = Ideal output x Correction factor x performance efficiency

Expected output/hour = 120 x 0.56 x 0.83 = 56 LCM/hour

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CONSTRUCTION EQUIPMENT

➢ Construction equipment productivity analysis is considered one of the best practices

that could improve productivity in infrastructure projects.
➢ Analyzing performances of various equipment and choosing the most suitable
construction equipment for a certain building project could help principal contractors to
reduce unnecessary costs and increase productivity.
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CONSTRUCTION EQUIPMENT – Productivity

➢ The use of tracking technologies such as bar codes and radio frequency identification
(RFID) could also have important applications in tools management.

➢ The technology could be used to identify the location of tools, the date the item was
checked out, and the person who took the tool.

➢ Site tool and consumables management strategies are recommended as potential

area for productivity improvement in industrial projects.

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Factors affecting the selection of construction equipment:

➢ Hard factors (Technical specifications, physical dimensions of the site,

constructed facility)

➢ Soft factors (Company policies, environmental constraints)

➢ Soft factors influence the decision-making to a large extent

➢ A construction company can acquire a construction plant and equipment

through
➢ Cash or outright purchase
➢ Hire-purchase
➢ Leasing

➢ The decision to choose between purchasing and renting is an important once,

and it is governed by number of factors.

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Factors affecting the selection of construction equipment:

➢ If a company has surplus funds available, it can invest in cash purchase of

plant and equipment, provided such investment guarantees a return more
than the minimum attractive rate of return of the company.

➢ The purchase of equipment raises the asset of the company and in fact this
entitles the company for certain tax incentives.

➢ The title (ownership) of the plant and equipment is with the company in the
purchasing option.

➢ In case of hire and purchase option, company enters into an agreement with
the financer of the plant and the equipment.

➢ The financer receives the specified rental from the company using the
equipment during the entire agreement period.

➢ The title of the equipment lies with the financer during the agreement period.

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Factors affecting the selection of construction equipment:

➢ Upon the completion of agreement period, the title is transferred in the name of the
company against some nominal amount of money.

➢ In case of leasing option, company pays the lease rentals to the lessor (lessor – one
who owns the equipment) for the use of equipment for a specified period.

➢ The title of the equipment never gets transferred to the company using the
equipment.

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Concept of depreciation (Life cycle of any equipment):

➢ If a company “X” purchases a truck for use in their construction and then decides
the very next day to sell it, it is unlikely that any buyer will pay the same amount to
buy it.

➢ The truck starts to loose value as soon it is purchased.

➢ The truck obviously becomes an operational asset for the company and has a
certain value in the account books of the company.

➢ The account book should appropriately reflect the “loss of value of the truck”
usually on the yearly basis.

➢ This “loss of value” is called depreciation.

➢ The annual value of the truck keeps on changing (decreasing) due to depreciation.

➢ Finally, a stage is reached when the truck may stop serving for the required
purpose, resulting in no value to the business, and subsequently be sold, scrapped
or written off.
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Concept of depreciation (Life cycle of any equipment):

Depreciated cost - The allocation of the cost of an asset over a period of time for
accounting and tax purposes.

Not all assets depreciate with time. [For example, land does not depreciate with time].

Depreciation calculation:
a) Purchase price or initial cost of the asset (P)
b) Economic life or recovery period allowed for the asset (N)
c) Salvage value of the asset (E)

Straight line Method:

➢ Most common method of calculating depreciating assets
➢ Assumption is that the asset loses an equal amount of value each year
➢ This annual depreciation is calculated by subtracting the salvage value of the asset
from the purchase price and then dividing the number by the estimated useful life
of the asset.
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Straight line Method:

Rm = Rate of depreciation = (1/N)

Dm = Annual Depreciation = (P-E) x (Rm)

P = Purchase cost or initial cost

E = Salvage value of the asset
Rm = Rate of depreciation

BVm = Book value of asset at EOYM (End of the year M) = BVm-1 - Dm

For an asset having an initial cost of Rs. 2 Lakhs, and a salvage value of Rs.
50,000 at the end of an economic life of 5 years, determine the annual
depreciation and the book value at end of the each year during the economic
life of the asset.

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Using Straight line Method:

P = Rs. 2,00,000; E = 50,000; N = 5 years

Rm = 1/N = 1/5 = 0.2

(P-E) = (Rs. 2,00,000 – Rs. 50,000) = Rs. 1,50,000

Annual Depreciation = (P-E) x (Rm) = (2,00,000 – 1,50,000) x 0.2 = Rs. 30,000

Year Opening book value Annual Closing value

(BVm-1) Depreciation (BVm)
0 0 0 Rs. 2,00,000
1 Rs. 2,00,000 Rs. 30,000 Rs. 1,70,000
2 1,70,000 30,000 1,40,000
3 1,40,000 30,000 1,10,000
4 1,10,000 30,000 80,000
5 80,000 30,000 50,000

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Using Sum of the years digit Method:

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Using Sum of the years digit Method:

Year (m) Opening book Annual rate of Annual Closing value (BVm)
value (BVm-1) Depreciation Depreciation
0 0 0 0 Rs. 2,00,000
1 Rs. 2,00,000 5/15 Rs. 50,000 Rs. 1,50,000
2 1,50,000 4/15 40,000 1,10,000
3 1,10,000 3/15 30,000 80,000
4 80,000 2/15 20,000 60,000
5 60,000 1/15 10,000 50,000

Tax benefits in the early years of the economic life of the asset.

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Using Declining balance method:

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Using Declining balance method:

Year (m) Opening book Annual rate of Annual Closing value (BVm)
value (BVm-1) Depreciation Depreciation
0 0 0 0 Rs. 2,00,000
1 Rs. 2,00,000 0.4 Rs. 80,000 (Rs. Rs. Rs. 1,20,000
2,00,000 x 0.4)
2 1,20,000 0.4 48,000 72,000
3 72,000 0.4 28,800 (22,000) 50,000
4 50,000 0.4 0 50,000
5 50,000 0.4 0 50,000

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Numerical Problem:

The earth moving equipment is purchased at a cost of Rs. 5 Lakhs. The income generated and
cost outflow for five years are given below. The salvage value is estimated to be nil.
Year 1 2 3 4 5
Gross income 3 3 2 2 2
Expenses 0.5 0.5 1 0.5 0.5

A tax rate of 40% is applicable to both income and gains and is not excepted to change in 5
years. A discount rate of 10% is appropriate considering the return on investment.

Determine the following.

a) Annual depreciation by straight line method
b) Annual depreciation by Double declining balance method
c) Considering only the DDB (switchover to straight line for the remaining tax life is
permitted if tax benefits possible), determine the Net-cash flow before tax, after-tax cash
flow and NPV.
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a) Straight line method: Rs. 1 lakh/year (2 marks)

Year Opening book value Annual Closing book

Depreciation value
0 0 0 5 Lakhs
Depreciatio
1 5 Lakhs 1 Lakh 4 Lakhs
n rate =
2 4 Lakhs 1 Lakh 3 Lakhs
(1/N)
3 3 Lakhs 1 Lakh 2 Lakhs
4 2 Lakhs 1 Lakh 1 Lakh
5 1 Lakh 1 Lakh Nil

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b) Double Declining Balance method (no switch over):

Year Opening book Annual Closing book Depreciation rate = (2/N) &
value Depreciation value instantaneous book value
0 0 0 5 Lakhs for calculation of
1 5 Lakhs 2 Lakh 3 Lakhs depreciation
2 3 Lakhs 1.2 Lakh 1.8 Lakhs
3 1.8 Lakhs 0.72 Lakh 1.08 Lakhs
4 1.08 Lakhs 0.432 Lakh 0.648 Lakh
5 0.648 Lakh 0.2592 Lakh 0.3888

Very Important Note: The book value of an asset never becomes zero when the
depreciation is determined using the double rate declining balance method.

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c) Double Declining Balance method (switch over permitted):
2 lakhs, 1.2 lakhs, 0.72 lakhs, 0.54 lakhs, 0.54 lakhs (1 mark)

Year Opening book Annual Closing book Depreciation

value Depreciation value rate = (2/N) &
0 0 0 5 Lakhs instantaneous
1 5 Lakhs 2 Lakh 3 Lakhs book value for
2 3 Lakhs 1.2 Lakh 1.8 Lakhs
calculation of
3 1.8 Lakhs 0.72 Lakh 1.08 Lakhs
depreciation till
4 1.08 Lakhs 0.54 Lakh 0.54 Lakh
3rd year.
5 0.54 Lakh 0.54 Lakh Nil

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Switch over - Scenarios:

First scenario: If we switch over in the 2nd year, that means, from 2nd year onwards, we
plan to adopt straight line depreciation….
Annual depreciation = (3 Lakhs – Nil) * 1/4= 0.75 Lakhs.
However, the depreciation calculated using DDB is 1.2 Lakhs which is more than 0.75
Lakhs. Hence, switch over to straight line is a disadvantage.

Second scenario: If we switch over in the 3nd year, that means, from 3rd year onwards,
we plan to adopt straight line depreciation….
Annual depreciation = (1.8 Lakhs – Nil) * 1/3 = 0.60 Lakhs.
However, the depreciation calculated using DDB is 0.72 Lakhs which is more than 0.60
Lakhs. Hence, switch over to straight line is a disadvantage.

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Switch over - Scenarios:

Third scenario: If we switch over in the 4th year, that means, from 4th year onwards, we
plan to adopt straight line depreciation….
Annual depreciation = (1.08 Lakhs – Nil) * 1/2 = 0.54 Lakhs.
However, the depreciation calculated using DDB is 0.432 Lakhs which is less than 0.54
Lakhs. Hence, switch over to straight line is an advantage.
Please note that, one shifting to straight line method, there is no going back again.

Net taxable income: Gross income – Expenses - Depreciation

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After-tax cash flow:

Year 1 2 3 4 5
Gross income 3 3 2 2 2
Expenses 0.5 0.5 1 0.5 0.5
Depreciation 2 1.2 0.72 0.54 0.54
Net taxable income =(3 – 0.5 – 2) = 0.5 1.3 Lakhs 0.28 Lakhs 0.96 Lakhs 0.96 Lakhs
Lakhs
Tax (40%) 0.2 Lakhs 0.52 Lakhs 0.112 Lakhs 0.384 Lakhs 0.384 Lakhs
After tax cash flow (0.5 – 0.2 Lakhs) + 1.98 Lakhs 0.888 Lakhs 1.116 Lakhs 1.116 Lakhs
2 = 2.3 Lakhs

Net Taxable income: 0.5 lakhs, 1.3 lakhs, 0.28 lakhs, 0.96 lakhs, 0.96 lakhs
Tax (40%): 0.2 lakhs, 0.52 lakhs, 0.112 lakhs, 0.384 lakhs, 0.384 lakhs
After tax cash flow: 2.3 lakhs, 1.98 lakhs, 0.888 lakhs, 1.116 lakhs, 1.116 lakhs
NPV = 0.849

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Net present value (NPV)

➢ Net present value (NPV) is a technique used in capital budgeting to find out whether a
project will add value or not.

➢ It involves finding future cash flows of an option and discounting them to find their
present worth and comparing it to the initial outlay required.

➢ Any calculation of net present value is incomplete if we ignore the income tax
implications of the project. This is because governments in most of the countries collect
tax from companies, which is based on the profits they generate.

➢ Taxes eat away a company’s profits and cash flows.

➢ Taxes affect a net present calculation in two ways: first, they affect periodic operating
cash flows; second, they affect the final salvage value of the project because any gain or
loss on sale carries tax implications.

➢ Adjustment for taxes involves calculating after-tax net cash flows and after-tax salvage
value (also called terminal value).
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Formula: after-tax net cash flows
The complexity in net present value calculation due to taxes arises from the simple fact that
capital budgeting decisions are based on cash flows while income tax is calculated on net
income.

Net cash flows are different from net income because some expenses are non-cash such as
depreciation, etc.

Following formulas are used in net present value calculation when there are tax implications.

➢ After-tax net cash flows = (cash inflows – cash out flows) – income taxes

➢ Income taxes = net income × tax rate

➢ Where net income = cash inflows – cash out flows – non-cash expenses

➢ Hence, income taxes = (cash inflows – cash out flows – non-cash expenses) ×tax rate

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Formula: after-tax net cash flows/AFTER-TAX SALVAGE VALUE

After some algebraic manipulation, these formulas can be merged and simplified as follows:

After-tax net cash flows = cash inflows – cash outflows – (cash inflows – cash outflows – non-
cash expenses) × tax rate

After-tax net cash flows = (cash inflows – cash outflows – non-cash expenses) × (1 – tax rate)
+ non-cash expenses

The increase in net cash flows due to decrease in taxes due to depreciation in called tax
shield.

Formula: after-tax salvage value:

➢ After tax salvage value = cash proceeds – tax on gain or loss

➢ Tax on gain on loss = (cash proceeds – book value) × tax rate

➢ After-tax salvage value = cash proceeds – (cash proceeds – book value) ×

tax rate
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