A financial analyst calculated that the after-tax salvage value for a machine was $10,200. The current book value of the asset is $12,000 and the firm's tax rate is 21 percent. How much could the machine be sold for today?

Question

Quizplus · Accepted Answer

The after-tax salvage value is calculated as the sale price minus taxes on the difference between the sale price and book value. Let S be the sale price. The equation is: $10,200 = S - 0.21(S - $12,000). Solving for S gives $9,721.52.

A Financial Analyst Calculated That the After-Tax Salvage Value for a Machine