Question
Consider an asset that costs $660,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a
Consider an asset that costs $660,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $135,000. If the relevant tax rate is 25 percent, what is the aftertax cash flow from the sale of this asset? (Do not round intermediate calculations.)
My Work:
1. depreciation expense per year: 660,000/8 = $82,500
2. value after 5 years: 660,000-(82,500*5) = $237,500
3. tax expense: 237,000*.25 = $61,875
4. aftertax cash flow: 237,500 - 61,875 = $185,625
I answered this and it was incorrect can you please explain where I went wrong.
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