Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $23 million, of which 80% has been depreciated. The used equipment can be sold today for $5.75 million, and its tax rate is 35%. What is the equipment’s after-tax net salvage value?
Book value as on date of sales=$23million(1-0.8)=$4.6million
Hence gain on sale=(5.75-4.6)=$1.15million
Hence after-tax net salvage value=Sale proceeds-(Tax rate*Gain on Sales)
which is equal to