<a href=\"http://tinypic.com?ref=2dhhemo\" target=\"_blank\"><img src=\"http://i

Question

<a href="http://tinypic.com?ref=2dhhemo" target="_blank"><img src="http://i59.tinypic.com/2dhhemo.png" border="0" alt="Image and video hosting by TinyPic"></a>

An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $6,400,000 and will be sold for $1,530,000 at the end of the project. Required: If the tax rate is 34 percent, what is the aftertax salvage value of the asset? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Aftertax salvage value $

Explanation / Answer

Hi,

Book Value = 6400000*(1-20%-32%-19.20%-11.52%) = 1105920

Gain on Sale of Asset = Sales Value - Book Value = 1530000 - 1105920 = 424080

After Tax Cash Flow = Sales Value - Tax on Gain = 1530000 -34%*424080 = $1385812.80

Answer is $1385812.80

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.