Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $16.8 million, of which 75% has been depreciated. The used equipment can be sold today for $5.6 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $16.8 million, of which 75% has been
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Salvage value refers to the residual value, that is, the value at which the equipment can be traded in the market after its use over the years. The equipment purchased is depreciated for its useful life for wear and tear and then the equipment is sold in the market to recover whatever use is left. When accounting for residual value in the company's statement, the after-tax value is taken into account as the company is liable to pay taxes on proceeds from the sale of fixed assets.
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