Liberty Services is now at the end of the final year of a project. The equipment

Question

Liberty Services is now at the end of the final year of a project. The equipment originally cost $22,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment’s after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment’s final market value is less than its book value, the firm will receive a tax credit as a result of the sale. (Points : 6)
a. $5,558

b. $5,850

c. $6,143

d. $6,450

e. $6,772

Explanation / Answer

Basis 5,625. Proceeds 6,000 Taxable Gain 375 Tax 150 Net value 225

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.