Consider an asset that costs $264,000 and is depreciated straight-line to zero o
ID: 2634465 • Letter: C
Question
Consider an asset that costs $264,000 and is depreciated straight-line to zero over its 13-year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $33,000.
If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? Hint: If sold at a loss, taxes will be negative, so ATSV = selling price - taxes on gain, would result in subtracting negative taxes. (Do not round your intermediate calculations.
Required :If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? Hint: If sold at a loss, taxes will be negative, so ATSV = selling price - taxes on gain, would result in subtracting negative taxes. (Do not round your intermediate calculations.
Explanation / Answer
ATSV = selling price - taxes on gain
= selling price + taxes on loss
=$33,000 + 0.34 * ($264,000/13*7 -$33,000)
=$70112.31
So , Answer is $70112.31