An asset used in a four-year project falls in the five-year MACRS class (MACRS T
ID: 2743370 • Letter: A
Question
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 $8,500,000 and will be sold for $1,890,000 at the end of the project.
If the tax rate is 30 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).)
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 $8,500,000 and will be sold for $1,890,000 at the end of the project.
Explanation / Answer
Year cost rate Beginning Balance Depreciation Ending Balance 1 8500000 0.2 8500000 1,700,000 6800000 2 8500000 0.32 6800000 2,720,000 4080000 3 8500000 0.192 4080000 1,632,000 2448000 4 8500000 0.1152 2448000 979,200 1468800 Sale price 1890000 Given Less: Book Value 1468800 * Gain 421200 (1890000-1468800) Less: Tax expense - 30 % 126360 (421200*30%) After tax salvage value 1763640 (1890000-126360)
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