1. Kenny Inc. has the following income statement for the most recent fiscal year: Sales $558.400...
1. Kenny Inc. has the following income statement for the most recent fiscal year:
Sales $558.400
Costs 346,800
Depreciation 94,500
EBIT $117100
Taxes (35%) $40985
Net Income $76115
Assume an equipment costs $960,000 and depreciated to zero on a straight-line method over its 8-year tax life. If the equipment can be sold for $18,500 at the end of a five-year project, what is the after tax salvage value (net salvage value) of the equipment?
Homework Answers
| Book value = (purchase price)*remaining life/total life | |
| = (960000)*3/8 | |
| = 360000 | |
| After tax salvage value = selling price*(1-tax rate)+book value*tax rate | |
| =18500*(1-0.35)+360000*0.35 | |
| =138025 | |
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