MULTIPLE CHOICE

Assume the following for a piece of equipment assuming straight-line depreciation: Purchase price $20,000; installation costs of $2,500; 4-Yr useful life with an estimated salvage value of $4,500; tax rate 40%; What would be the cash flow from salvage if the asset sold after 2 years for (a) $15,500 and (b) $7,000?

A. $14,700; $9,600

B. $12,900; $7,800

C. $2,000; $1,200

D. $8,100; $5,400