i am having issues on 3 questions on some practice homework. explinations/ formu
ID: 2623138 • Letter: I
Question
i am having issues on 3 questions on some practice homework. explinations/ formulas would be appreciated. i will post each question seporatly. I am going to bed now. if you answer while i am away i will grant the points in the morning.
Consider an asset that costs $639,000 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $166,000. If the relevant tax rate is 30 percent, what is the aftertax cash flow from the sale of this asset?
Explanation / Answer
Annual depreciation under straight line method = (Cost of the asset-Salvage value)/Life of the asset
= (639000-0)/9
= $71000 each year
Book value of the asset at the end of the project i.e. at the end of 5th year = Cost of the asset
Annual depreciation under straight line method = (Cost of the asset-Salvage value)/Life of the asset
= (639000-0)/9
= $71000 each year
Book value of the asset at the end of the project i.e. at the end of 5th year = Cost of the asset
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