TVM Consulting bought new building for its headquarters in the year 2000. The pu

Question

TVM Consulting bought new building for its headquarters in the year 2000. The purchase cost was 723198 dollars and in addition it had to spend 78558 dollars adapting the space for its services. The building has been in use since June 21st, 2000. TVM Consulting forecasted that in 2030 the building would have a net salvage value of $1,000,000. Using the US Straight Line Depreciation Schedule, estimate the Net Cash Flow from Salvage Value if TVM consulting decides to sell the building on April 15th 2004 for $1446706, and that the prevailing tax rate for capital gains is 34%.

Explanation / Answer

Net Depreciation per year : (723198+78558-1000000)/30=-6608.133333 ( means building is apreciation $6608 per Year) ;; Price of the building as per TVM estimate: 723198+78558+(6608*81.5)=$1340308 ( Since TVM used the building for 81 and half months);;;Net Profit :1446706-1340308=106398;; Profit After tax:106398*(1-34%)=$70222.68

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