Kennedy Air Services is now in the final year of a project. The equipment originally cost $22 million, of which 75% has been depreciated. Kennedy can sell the used equipment today for $5.5 million, and its tax rate is 30%. What is the equipment’s after-tax salvage value? Round your answer to the nearest cent.
the equipment’s after-tax salvage value=$ 5,500,000
Working notes for the above answer is as under
Particular
Amount in $
Equipment Original Cost
22,000,000
Less:
Depriciation (755)
16500000
Book Value
5,500,000
Now we will calculate Gain on sale as follow
Particular
Amount in $
Gain on Sale
Sale Price
5,500,000
Book Valu
5,500,000
Gain on Sale
0
Tax on Gain =
0
equipment’s after-tax salvage value
5,500,000
