Respuesta :
Answer:
b. $5,850
Explanation:
For computing the after-tax salvage value , we need to do the following calculations:
1. Determine the book value:
= (Original cost of equipment) - (original cost of equipment × depreciation percentage)
= ($22,500) - ($22,500 × 75%)
= $22,500 - $16,875
= $5,625
2. Determine the profit or loss on sale of equipment:
Profit = Sale value - Book value
= $6,000 - $5,625
= $375
3. Determine the tax on profit on sale of equipment:
= Profit × tax rate
= $375 × 40%
= $150
4. Now finally calculation of the after-tax salvage value is shown below:
= Salvage value - profit tax
= $6,000 - $150
= $5,850
The equipment's after-tax salvage value for use in a capital budgeting analysis is $5850.
What is the equipment's after-tax salvage value?
The first step is to determine the book value of the equipment.
Book value = (1 - percentage depreciation) x original cost of the equipment
0.25 x $22,500 = $5625
Now, determine the profit on the sale of the equipment.
Profit = selling price - book value
$6000 - $5625
= $375
After tax salvage value = selling price - (tax x profit)
$6000 - (0.4 x 375)
= $5850
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