help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Kewlin Hotels is considering replacing their heavy kitchen equipment

Kewlin Hotels is considering replacing their heavy kitchen equipment

Finance

Kewlin Hotels is considering replacing their heavy kitchen equipment. The equipment was purchased 4 years ago at a total cost of $20,000. It is being depreciated straight-line to a zero value over 8 years. If Kewlin sells the kitchen equipment for $10,000, what is the after-tax cash flow to Kewlin? (use 40% as the tax rate). $6,000 $4,000 $10,000 O $14,000

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

The correct answer is $ 10000

Explanation

Original price of asset = 20000

Life = 8 years and salvage value = 0

So Depreciation per year = ( 20000 - 0)/ 8 = 2500

After 4 years the book value of machine is Cost - Depreciation for 4 years

= 20000 - ( 4* 2500)

= 10000

Sale value = 10000

Since the book value is equal to the sale value, there will be no taxes payable.

So after tax cash flow will be 10000

So $ 10000 is the correct answer

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)