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An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes....

An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $8,400,000 and will be sold for $2,040,000 at the end of the project. If the tax rate is 23 percent, what is the aftertax salvage value of the asset? Refer to (MACRS schedule) (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number.

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Expert Solution

Sales Price a $       20,40,000
Book Value b $       14,51,520
Profit on sale c=a-b $          5,88,480
Tax on profit d=c*23% $          1,35,350
After tax sale e=a-d $       19,04,650
Working:
Depreciation Schedule:
Year Cost Depreciation rate Depreciation Expense Accumulated Depreciation Expense Ending Book Value
1 $       84,00,000 20.00% $       16,80,000 $ 16,80,000 $ 67,20,000
2 $       84,00,000 32.00% $       26,88,000 $ 43,68,000 $ 40,32,000
3 $       84,00,000 19.20% $       16,12,800 $ 59,80,800 $ 24,19,200
4 $       84,00,000 11.52% $          9,67,680 $ 69,48,480 $ 14,51,520

jeff jeffy answered 4 months ago
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