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Leisure vacations is considering a project with a life of 5 years that will require the purchase of $1. 4 million in new 5-year macrs equipment. The macrs rates are 20 percent, 32 percent, 19. 2 percent, 11. 52 percent, 11. 52 percent, and 5. 76 percent for years 1 to 6, respectively. Ignore bonus depreciation. The firm desires a minimum 14 percent rate of return and the tax rate is 22 percent. The equipment can be sold at the end of the project for an estimated $225,000. What is the amount of the aftertax salvage value?.

User Pbies
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The amount of the aftertax salvage value is equal to the estimated sale price of the equipment at the end of the project, minus the amount of taxes owed on the sale.

The amount of taxes owed on the sale is equal to the tax rate multiplied by the estimated sale price of the equipment.

Therefore, the amount of the aftertax salvage value is equal to $225,000 - $225,000 * 22% = $175,500.
User Jeeka
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