The salvage value of an asset creates an aftertax cash flow in an amount equal to the sales price:

Question

Quizplus · Accepted Answer

The salvage value of an asset creates an aftertax cash flow equal to the sales price minus the tax on the gain or loss from the sale, which is calculated as [Tax rate × (Sales price − Book value)]. If the sales price is higher than the book value, this results in a tax on the gain. If the sales price is lower, it results in a tax benefit (negative tax) from the loss.

The Salvage Value of an Asset Creates an Aftertax Cash