Question

Consider an asset that costs $484,000 and is depreciated straight-line to zero over its 13-year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $60,500.

  

Required :

If the relevant tax rate is 35 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.)

rev: 09_18_2012

$130,540.38

$1,267,487.00

$39,325.00

$124,013.36

$137,067.40

Answer 1

Asset cost	$     484,000.00
Less: Depreciation charged	$     223,384.62	=484000*6/13
Book value at sale	$     260,615.38
Sale value of machine	$       60,500.00
Profit/(Loss) on sale	$ (200,115.38)
Less: Tax payable @ 35%	$     (70,040.38)
After tax cash flows from sale of asset	$     130,540.38