Consider an asset that costs $730,000 and is depreciated straight-line to zero over its seven-year tax...
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Consider an asset that costs $730,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $163,000. If the relevant tax rate is 24 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations.) |
Homework Answers
Annual depreciation=(Cost-Salvage value)/Useul Life
=(730,000/7)=$104,285.7143/year
Hence book value as on date of sale=Cost-Accumulated depreciation
=730,000-(104,285.7143*5)
=$208,571.4285
Hence since sale proceeds is less than book value;loss on sale=($208,571.4285-$163000)
=$45571.4285
Hence aftertax cash flow=Sale proceeds+(loss on sale*Tax rate)
=163000+(45571.4285*0.24)
=$173937.14(Approx).
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