Question

In: Finance

An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for...

An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $12,240,000 and will be sold for $2,720,000 at the end of the project.

  

If the tax rate is 23 percent, what is the aftertax salvage value of the asset?

Multiple Choice

  • $2,580,867

  • $2,094,400

  • $2,859,133

  • $2,709,910

  • $2,451,823

Solutions

Expert Solution

Correct option is "A" -2580867

Year MACRS 5 Year depreciation rate cummulative rate
1 20% 20%
2 32% 20+32=52%
3 19.2% 52+19.2=71.2%
4 11.52% 71.2+11.52= 82.72%
5 11.52%
6 5.76%

Book vaue at end of year 4 =Cost [1-Cumulative depreciation rate at end of year 4]

              = 12,240,000 [1-.8272]

            = 12,240,000 * .1728

           = $ 2115072

Gain /(loss) on sale of asset =sale value -Book value

                   = 2720000 - 2115072

                  = 604928

Tax on sale = 604928 *23%= 139133 rounded

After tax salvage value =Sale value -Tax on sale

                       = 2720000 -139133

                       = 2,580,867

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for...
An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $18,180,000 and will be sold for $4,040,000 at the end of the project.    Required: If the tax rate is 33 percent, what is the aftertax salvage value of the asset? Options $3,743,496 $2,706,800 $4,336,504 $3,930,671 $3,556,322
An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for...
An asset used in a 4-year project falls in the 5-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $12,420,000 and will be sold for $2,760,000 at the end of the project.    If the tax rate is 23 percent, what is the aftertax salvage value of the asset? Multiple Choice $2,618,820 $2,125,200 $2,901,180 $2,749,762 $2,487,879
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 $16,517,578 and will be sold for $7,378,085 at the end of the project. If the tax rate is 0.28, what is the aftertax salvage value of the asset ?
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 $17341411 and will be sold for $7116692 at the end of the project. If the tax rate is 0.29, what is the aftertax salvage value of the asset (SVNOT)?
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 $15,535,460 and will be sold for $5,328,631 at the end of the project. If the tax rate is 0.39, what is the aftertax salvage value of the asset (SVNOT)?
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)?
An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for...
An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $7,200,000 and will be sold for $1,620,000 at the end of the project. A) What is the book value of the equipment at the end of Year 4? B) If the tax rate is 24 percent, what is the aftertax salvage value of the asset?
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.
10.Calculating Salvage ValueAn asset used in a 4-year project falls in the 5-year MACRS class for...
10.Calculating Salvage ValueAn asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $7.6 million and will be sold for $1.4 million at the end of the project. If the tax rate is 21 percent, what is the aftertax salvage value of the asset? 11.Calculating NPVThurston Petroleum is considering a new project that complements its existing business. The machine required for the project costs $4.1 million. The marketing...
An asset used in a four-year project falls in the five-year MACRS class for tax purposes....
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,050,000 and will be sold for $1,250,000 at the end of the project. If the tax rate is 25 percent, what is the aftertax salvage value of the asset? Refer to Table 8.3. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT