Question

Consider an asset that costs $705,000 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 $153,000. If the relevant tax rate is 24
percent, what is the aftertax cash flow from the sale of this
asset? |

After tax salvage value ?

Answer #1

Depreciation per year as per straight line method

= (Purchase cost – Salvage value) / Useful life

= ($705,000 – 0) / 8

= $ 88,125 per year

So, accumulated depreciation at the end of the 5 year project

= Depreciation per year x Number of years

= $ 88,125 x 5

= $ 440,625

So, Book value at the end of 5 years

= Purchase cost – Accumulated depreciation

= $705,000 - $ 440,625

= $ 264,375

Loss of sale of asset for $153,000

= Book value – Sale value

= $ 264,375 - $153,000

= $ 111,375

Tax saving on loss

= Loss x Tax Rate

= $ 111,375 x 24%

= $ 26,730

So, after tax salvage value

= Sale value + Tax Saving on loss

= $153,000 + $ 26.730

= $ 179,730

Consider an asset that costs $712,000 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 $184,000. If the relevant tax rate is 35
percent, what is the aftertax cash flow from the sale of this
asset? (Do not round intermediate calculations.)
Aftertax salvage value $

Consider an asset that costs $690,000 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 $147,000. 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.)
Aftertax salvage value?

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
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Consider an asset that costs $544,552 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 $156,415. If the relevant tax rate is 33
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asset?

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straight-line to zero over its 9-year tax life. The asset is to be
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Required :
If the relevant tax rate is 34 percent, what is the aftertax
cash flow from the sale of this asset? (Do not round your
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Consider an asset that costs $220,000 and is depreciated
straight-line to zero over its 5-year tax life. The asset is to be
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Required :
If the relevant tax rate is 32 percent, what is the aftertax
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Consider an asset that costs $595197 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
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asset?

Consider an asset that costs $193,600 and is depreciated
straight-line to zero over its 11-year tax life. The asset is to be
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be sold for $24,200. Required : If the relevant tax rate is 34
percent, what is the aftertax cash flow from the sale of this
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$57,860.00
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Required :
If the relevant tax rate is 32 percent, what is the aftertax
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intermediate calculations.)
$123,123.00
$117,260.00
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