Question

In: Finance

Assume that an asset is being held on a firm’s balance sheet at a value of...

Assume that an asset is being held on a firm’s balance sheet at a value of $25,000. The firm no longer needs the asset and sells it for $42,000. The relevant tax rate is 25%. What is the relevant (cash-based) salvage value for the firm to include in any capital budgeting analysis of this transaction?

Solutions

Expert Solution

Gain on sale=(42000-25000)=$17000

Hence relevant salvage value=Sale proceeds-(Tax rate*Gain on sale)

=42000-(17000*25%)

which is equal to

=$37750

jeff jeffy answered 2 years ago
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