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An asset used in a three-year project falls in the three-year MACRS class for tax purposes. The MACRS percentage rates starting with Year 1 are: 33.33, 44.45, 14.81, and 7.41.The asset has an acquisition cost of $2.6 million and will be sold for $1.1 million at the end of the project. If the tax rate is 34 percent, what is the aftertax salvage value of the asset

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abiolataiwo2015

Answer:

$791,504.40

Explanation:.

Calculation for the after tax salvage value of the asset

Asset Aftertax salvage value = $1,100,000- [$1,100,000-($2,600,000 x .0741)] x .34

Asset Aftertax salvage value = $1,100,000- [$1,100,000-$1,926,600] x .34

Asset Aftertax salvage value = $791,504.40

Therefore the after tax salvage value of the asset will be $791,504.40

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