Consider an asset that costs $878,400 and is depreciated straight-line to zero o
ID: 2623322 • Letter: C
Question
Consider an asset that costs $878,400 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a six-year project; at the end of the project, the asset can be sold for $135,100.
If the relevant tax rate is 30 percent, what is the aftertax cash flow from the sale of this asset?
Aftertax salvage value: $_______________
Consider an asset that costs $878,400 and is depreciated straight-line to zero over its nine-year tax life. The asset is to be used in a six-year project; at the end of the project, the asset can be sold for $135,100.
Explanation / Answer
book value after six years =878,400 -6*878,400/9=292800
market value is less than book value
Aftertax salvage value = 135,100