A firm purchases equipment for $19,000,000. The equipment has a useful life of 11 years and...

A firm purchases equipment for $19,000,000. The equipment has a useful life of 11 years and a salvage value of $3,454,545 at the end of the project's life of 11 years. The tax rate is 38%. What is the equipment's after-tax salvage value?

$1,312,727

$4,110,909

$2,141,818

$0

Expert Solution

Answer: The correct answer is $2,141,818

Salvage Value = $3,454,545

Equipment’s After tax Salvage Value = Salvage Value * (1 – tax rate)
Equipment’s After tax Salvage Value = $3,454,545 * (1 – 0.38)
Equipment’s After tax Salvage Value = $3,454,545 * 0.62
Equipment’s After tax Salvage Value = $2,141,818

jeff jeffy answered 2 years ago

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