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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.

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Posted Jun 20 2019

AnsweredJun 20 2019
OC2736562
University of Waterloo

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


Find the APR, or stated rate, in each of the following cases:

Stated Rate (APR) Number of Times Compounded Effective Rate (EAR)
% Semiannually 11.60 %
% Monthly 8.70
% Weekly 7.80
% Infinite 15.90
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