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An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS...

An asset used in a 4-year project falls in the 5-year MACRS class (refer to MACRS table on page 277), for tax purposes. The asset has an acquisition cost of $22,437,430 and will be sold for $5,064,805 at the end of the project. If the tax rate is 0.39, what is the aftertax salvage value of the asset (SVNOT)?

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Expert Solution

After tax salvage value of asset = Sales value - ((Sales value - Book Value)*Tax Rate)
= 5064805-((5064805-3877188)*0.39)
= $       46,01,634
Working:
MACRS schedule:
Year Cost Depreciation rate Depreciation expense Accumulated Depreciation expense Ending Book Value
a b c=a*b d e=a-d
1 $       2,24,37,430 20.00% $       44,87,486 $     44,87,486 $ 1,79,49,944
2 $       2,24,37,430 32.00% $       71,79,978 $ 1,16,67,464 $ 1,07,69,966
3 $       2,24,37,430 19.20% $       43,07,987 $ 1,59,75,450 $     64,61,980
4 $       2,24,37,430 11.52% $       25,84,792 $ 1,85,60,242 $     38,77,188

jeff jeffy answered 4 months ago
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