Question

A piece of newly purchased industrial equipment for a four year project was purchased by a company for $970,000. The equipment was depreciated using the five year MACRS schedule and was sold for $240,000 at the end of the four year project. Their tax rate is 25%.

What is the after tax salvage value?

Answer 1

Year MACRS Rate cost Depreciation Accumulated Depreciation Book value 970,000.00 194,000.00 194,000.00 776,000.00 23 4 0.32 0.192 0.1152 970,000.00 $ 970,000.00 $ 970,000.00 310,400.00 $ 186,240.00 $ 111,744.00 504,400.00 $ 690,640.00 $ 802,384.00 465,600.00 $ 279,360.00 $ 167,616.00 $ $ $ $ c=a*b 5 0.1152 970,000.00 111,744.00 914,128.00 55,872.00 $ $ $ $ 6 0.0576 970,000.00 55,872.00 970,000.00 $ $ $ $ $ b-d Book Value at the end of year 5 $ 167,616.00 Less sale price Book value profit tax@25% After tax salvage value $ $ $ $ $ 240,000.00 167,616.00 72,384.00 18,096.00 221,904.00 240000-18096 Less