Consider an asset that costs $334,400 and is depreciated straight-line to zero o
ID: 2722569 • Letter: C
Question
Consider an asset that costs $334,400 and is depreciated straight-line to zero over its 9-year tax life. The asset is to be used in a 3-year project; at the end of the project, the asset can be sold for $41,800.
If the relevant tax rate is 32 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.)
$99,762.67
$28,424.00
$94,774.54
$697,236.00
$104,750.80
Consider an asset that costs $334,400 and is depreciated straight-line to zero over its 9-year tax life. The asset is to be used in a 3-year project; at the end of the project, the asset can be sold for $41,800.
Explanation / Answer
$99,762.67 Statement showing computations Particulars Amount Cost of Asset 334,400.00 Life in years 9.00 Depreciation =334,400/9 37,155.56 Depreciation for 3 Years = 37,155.56 *3 111,466.67 Book value after 3 Years = 334,400 - 111,466.67 222,933.33 Sale Value 41,800.00 Loss on Sales 181,133.33 Tax Savings on Loss @ 32% 57,962.67 After Tax Cash Flow= 41,800 + 57,962.67 99,762.67