Question

Consider an asset that costs $584,000 and is depreciated straight-line to zero over its eight-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 $182,000. If the relevant tax rate is 21 percent, what is the aftertax cash flow from the sale of this asset?  (Do not round intermediate calculations.)

Multiple Choice

• $168,852

• $219,000

• $182,000

• $173,970

• $189,770

Answer 1

VALUE OF THE ASSEST	584,000.00
DEP PER YEAR	73,000.00	584000/8
DEP VLAUE IN 5 YEARS	365,000.00	=584000-73000
BOOK VALUE OF THE ASSEST AT THE END OF
5 YEAR	219,000.00	=584000-365000
SALE OF THE ASSEST	182,000.00
PROFIT	-37,000.00	LOSS
SO TAX IS	0.00	NILL
CASH FLOW	182,000.00	=0+182000
SO THE CORRECT OPTIN IS C

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