(SOLVED) Power Manufacturing has equipment that it purchased 6 years ago for $2,700,000.

Discipline: Finance

Type of Paper: Question-Answer

Academic Level: Undergrad. (yrs 1-2)

Paper Format: APA

Pages: 1 Words: 49

Question

Power Manufacturing has equipment that it purchased 6 years ago for $2,700,000. The equipment was used for a project that was intended to last for 8 years and was being depreciated over the life of the project.

However, due to low demand, the project is being shut down. The equipment was depreciated using the straight-line method and can be sold for $430,000 today. The company's tax rate is 40 percent.

The aftertax salvage value of the equipment is $______.


Expert Solution Preview


Annual depreciation=(Cost-Residual value)/Useful life

= (2,700,000/8)

= $337500/year


Hence book value as on date of sale=Cost-Accumulated depreciation

=