Problem 13-3 Net Salvage Value Allen Air Lines must liquidate some equipment tha
ID: 2784641 • Letter: P
Question
Problem 13-3 Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $24 million, of which 80% has been depreciated. The used equipment can be sold today for $8.4 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000. Problem 13-3 Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $24 million, of which 80% has been depreciated. The used equipment can be sold today for $8.4 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000. Problem 13-3 Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $24 million, of which 80% has been depreciated. The used equipment can be sold today for $8.4 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000.Explanation / Answer
Book value as on date of sales=$24million(1-0.8)=$4.8million
Hence gain on sales=(8.4-4.8)=$3.6million
Hence after tax salvage value=Sales proceeds-(Tax rate*Gain on sales)
=8.4-(0.35*3.6)
=$7,140,000.