Unformatted text preview: asset after 5 years is $180,000 less 0.95 of that $180,000 (five years' depreciation factors add to 95%), or $180,000 less $171,000 = $9,000 book value. Tax owed = ($10,000  $9,000) x 0.40 Tax owed = $1,000 x 0.40 Tax owed = $400 Since this is tax owed, you *subtract* it from the sale price to get the total aftertax proceeds from the sale of the asset. $10,000 $400 = $9,600 final answer for the total aftertax proceeds of sale of this new asset after 5 years. Case 3: After 7 years: Now the asset is fully depreciated (in fact it was after 6 years, since a 5year asset class item has 6 years of depreciation, as shown on Pg. 106, your depreciation table). Tax owed = ($10,000  $0 book value) x 0.40 Tax owed = $4,000 Since this is tax owed, you *subtract* it from the sale price to get the total aftertax proceeds from the sale of the asset. $10,000 $4000 = $6,000 final answer for the total aftertax proceeds of sale of this new asset after 7 years....
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 Spring '12
 JohnZietlow
 Finance

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