Consider an asset that costs $311,000 and is depreciated straight-line to zero over its six-year tax life.The asset is to be used in a four-year project; at the end of the project,the asset can be sold for $58,000.If the relevant tax rate is 34 percent,hat is the aftertax cash flow from the sale of this asset?

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Quizplus · Accepted Answer

The after-tax cash flow from the sale of the asset is calculated as follows:Sale price: $58,000Book value: $311,000 / 6 * 4 = $207,333.33Taxable gain: $58,000 - $207,333.33 = -$149,333.33Tax savings: -$149,333.33 * 34% = $50,766.67After-tax cash flow: $58,000 + $50,766.67 = $108,766.67

Consider an Asset That Costs $311,000 and Is Depreciated Straight-Line