Consider an asset that costs $176,000 and is depreciated straight-line to zero over its 11-year tax life.The asset is to be used in a 7-year project; at the end of the project,the asset can be sold for $22,000.The relevant tax rate is 30 percent.What is the aftertax cash flow from the sale of this asset?
A)$31,800
B)$32,600
C)$33,300
D)$34,100
E)$34,600

Question

Quizplus · Accepted Answer

Book value at end of year 7 = $176,000 × 4/11 = $64,000Aftertax salvage value = $22,000 + [($64,000 - $22,000) × .30] = $34,600

Consider an Asset That Costs $176,000 and Is Depreciated Straight-Line