An equipment was purchased by a Company at the cost of $875,000. It was depreciated for...

An equipment was purchased by a Company at the cost of $875,000. It was depreciated for five years on a straight-line basis to zero-salvage value. The market value of this equipment is $85,000. Tax rate applicable to this Company is 40%. Calculate the After-tax Salvage value. a. 585.000 b. 5121,000 c. 590,000 d. 551,000

Expert Solution

d. 51,000
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Statementshowing Computations
Paticulars	Amount
Purchase cost	875,000.00
Carrying value after 5 years	-
market value of this equipment	85,000.00
Gain on sale = 85,000 - 0	85,000.00
Tax on gain =85000*40%	34,000.00
After-tax Salvage value = 85,000 - 34,000	51,000.00

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