BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

AFTER-TAX SALVAGE VALUE Karsted Air Services is now in the final year of a project. The equipment originally cost $29 million, of which 75% has been depredated. Karsted can sell the used equipment today for $8 million, and its tax rate is 35%. What is the equipment's after-tax salvage value?

Summary Introduction

To compute: The after tax salvages value of equipment.

Introduction:

Salvage Value:

Salvage value is the resale value that is estimated by the management as the amount to be realized at the end of useful life of an asset. While calculating the depreciation of a project, this is important variant in the calculation.

Explanation

Given information:

Original cost of equipment is $29 million.

75% of the value is depreciated.

Market value is $8 million.

Tax rate is 35%.

Book value is $7.25 million (working note).

Formula to calculate after tax salvage value is,

After tax salvage value=[Book value of equipment+[(Market valueBook value)×(1Tax rate)]]

Substitute $7.25 million for book value, $8 million for market value and 35% for tax rate.

After tax salvage value={$7.25million+[($8million$7.25million)×(10

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is allocation?

Managerial Accounting: The Cornerstone of Business Decision-Making

What functions does the SPLMS control?

Accounting Information Systems

Compare this information with other firms in the same industry. To see how Apple stacks up against its peers, s...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

List the two supplemental disclosures required under the indirect method.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

When does a country become an exporter of a good? An importer?

Principles of Macroeconomics (MindTap Course List)

What are the five principles of lean thinking?

Cornerstones of Cost Management (Cornerstones Series)