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# Problem 11-3 Net Salvage Value Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost \$19 million, of which 85% has been depreciated. The used equipment can be sold today for \$6.65 million, and its tax rate is 35%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000. \$

##### OC2736562

Salvage value is the value that the company receives from the sale of an asset at the end of the useful life of the asset.

Computation of equipment's after-tax net salvage value:

 Details Amount \$ Salvage Value (Sale value) 6,650,000 Less: Book value = 19M -85% depreciated = 2.85M -2,850,000 Net Salvage Value 3,800,000 Less: Tax rate 35% 1,330,000 After tax salvage value 2,470,000

Therefore, equipment's after-tax net salvage value = \$ 2,470,000

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