Homework Answers
Given that,
Cost of an asset = $193600
it is depreciated straight line to zero over the life of 11 years
So, annual depreciation is = cost/useful life = 193600/11 = $17600
So, Book value of asset after 7 years = cost - 7*annual depreciation = 193600 - 7*17600 = $70400
tax rate t = 32%
asset is sold for $24200 after 7 years
So, after tax cash flow from the sale of equipment is
ATCF = salvage value - ((salvage value - book value)*tax rate) = 24200 - ((24200-70400)*0.32) = $38984
So, Option C is correct.
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