Allen Air Lines must liquidate some equipment that is being replaced

Finance Dec 23, 2020

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $19.6 million, of which 80% has been depreciated. The used equipment can be sold today for $5.6 million, and its tax rate is 25%. What is the equipment's after-tax net salvage value? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. $ $

Expert Solution

=Current value-(Current value-Original Cost*(1-% already depreciated))*tax rate
=5.6-(5.6-19.6*(1-80%))*25%
=5.18000 million
=5180000

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