A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For...
A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For capital budgeting purposes, however, you will use cash flow from salvage at the end of four years and assuming you can obtain a sales price of one half of the initial cost. What will that Year 4 savage cash flow be if the company's tax rate is 27.0%?
Homework Answers
Written down value after 4 years = Initial Cost - Depreciation for 4 years
= 160,000 - 160,000*4/5
= $32,000
Selling price = $80,000
Gain on Sale = $48,000
Tax on gain = 48000*27% = $12,960
Salvage cash flow = Sales value - tax on gain
= 80,000 - 12,960
= $67,040
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A fleet of delivery vans will cost $160,000. Depreciation is
straight line over five years. For...
A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For...
A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For capital budgeting purposes, however, you will use cash flow from salvage at the end of four years and assuming you can obtain a sales price of one half of the initial cost. What will that Year 4 savage cash flow be if the company's tax rate is 27.0%? Group of answer choices about $12,960 $80,000 $67,040
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