In: Finance
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)?
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 |