Chapter 9 Graded Homework Question 6 (on value 10.00 points Consider an asset th

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Chapter 9 Graded Homework Question 6 (on value 10.00 points Consider an asset that costs S635000 and is depreciated straight-line to zero over its eight year tax . The asset is to be used in a five-year project, at the end of the project, the asset can be sold for $125,000 Required If the relevant tax rate is 35 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g. 32.16)) Aftertax salvage value References eBook & Resources Worksheet Learning Objective: 09-02 Analyze a projects projected cash flows Difficulty: 1 Basic Section 9.4 More on Project Cash Flow Type here to search up

Explanation / Answer

Annual depreciation = $635,000/8=79375

So, after five years, the accumulated depreciation will be: Accumulated depreciation = 5($79375)=$396875

book value at the end of Year 5 is thus: BV(5)=635000-396875=238125

Aftertax salvage value = $125,000 + ($238125 ? 125,000)(0.35)=164593.75

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