In: Finance
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
d. 51,000 | |
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Please find below the answer | |
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 |