Book value as on date of sale=Cost-Accumulated Depreciation
=25*(1-0.85)=$3.75 million
Hence gain on sale=(8.75-3.75)=$5 million
After-tax salvage value=Sale proceeds-(gain on sale*Tax rate)
=8.75-(0.4*5) million
=$6,750,000
Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment...
Problem 11-03 Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $18 million, of which 85% has been depreciated. The used equipment can be sold today for $3.6 million, and its tax rate is 40%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000
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