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 1 year 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)?
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.)
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 $4,750,000 and will be sold for $1,375,000 at the end of the project. If the tax rate is 24 percent, what is the aftertax salvage value of the asset? Refer to Table 10.7. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) What is the: After-tax salvage value:
Calculating Salvage Value, An asset used in a four-year project falls in the five-year MACRS class...
Calculating Salvage Value, 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 $9,300,000 and will be sold for $2,100,000 at the end of the project. If the tax rate is 35 percent, what is the after tax salvage value of the asset?
A. A fixed asset is classified as 5-year MACRS property and has an initial cost of...
A. A fixed asset is classified as 5-year MACRS property and has an initial cost of $41,000 What is the aftertax cash flow from the sale of this asset if the pre-tax salvage value at the end of year 3 is $17,500 and the tax rate is 34 percent? Year Five-Year Property Class 1 20.00 %           2 32.00            3 19.20           4 11.52            5 11.52 6 5.76 $15,439.38 $15,558.04 $15,564.72 $15,463.06 B. A firm has sales for the...
An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT...
An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and money is worth 10% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT