Homework SourseP107 Calculating Salvage Value LO1 asset is to be used in a
P10-7 Calculating Salvage Value [LO1] asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $27,500. Required If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.) O $48,510.00 O $43,890.00 O $46,200.00 O $18,150.00 $261.262.00 ![P10-7 Calculating Salvage Value [LO1] asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $27,500. Required If the re](/WebImages/21/p107-calculating-salvage-value-lo1-asset-is-to-be-used-in-a-1048187-1761545527-0.webp "P10-7 Calculating Salvage Value [LO1] asset is to be used in a 5-year project; at the end of the project, the asset can be sold for $27,500. Required If the re")
Solution
Depreciation for 5 years = 5 / 8 * 220000 = 137500
After project asset value = 220000 - 137500 = 82500
Asset sold cash inflow = 27500
Since the asset is sold at loss, tax saving for loss = (82500 - 27500) * 34% = 18700
Total cash inflow = 27500 + 18700 = 46200
