a potential new project has an expected salvage value of $200,000 and an expected book value of zero at the end of its 5-year expected life. what taxes would the company own at the end of year 5 because of this project's expected salvage value of their tax rate is 25%.

After all depreciation has been properly expensed, the salvage value of an asset is its book value. The salvage value of an asset is determined by what a corporation anticipates getting in exchange for selling or dividing the asset after the end of its useful life. The amount that the object can be sold for when its useful life is up is its salvage value. The estimated value of an asset that is fixed at the end of its useful life or lease term is its residual value, which is often referred to as salvage value. The residual value is one of the lessor's main ways for calculating the amount of the lessee's periodic lease payments in lease agreements.

Why is salvage value important?

Determining the salvage value of an asset aids a company in planning its depreciation schedule. This schedule's identification is crucial for financial accounting departments' bookkeeping needs, including tax deductions and calculating how much an asset will increase or decrease cash flow.

Briefing:

Salvage Value = $200,000

Excepted Book Value=0

Excepted Life= 5 Year

Tax Rate= 25%

Now,

Gain over the book value = Salvage value - Expected book value

= $200,000 - 0

= $200,000

Taxes owed = Gain over the book value × Tax rate

= $200,000 × 25%

= $50,000

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