Question

tylor is considering a five-year project that will require $859,000 for new fixed assets that will be deprecieated what is the amount of the aftertax salvage value

Answer 1

Answer:

$120,603.60

Explanation:

The computation is shown below:

But before that the following calculations to be done

Salvage Value = Cost of Asset × 18%

= $859,000 × 18%

= $154,620

Since the fixed asset depreciated to zero for the 5 years so the book value should also be zero

Now  

Capital Gain = Salvage Value - Book value of Asset

= $154,620 - $0

= $154,620

Tax on Capital Gain = Capital Gain  ×  Tax Rate

= $154,620  ×  0.22

= $34,016.4

And finally,

After Tax Salvage Value = Salvage Value - Tax on Capital Gains

= $154,620 - $34,016.40

= $120,603.60