Question
A company purchased an equipment worth $250,000. It will be depreciated using the straight-line depreciation over 8 years. Assume a tax rate of 20%. Comment:
A company purchased an equipment worth $250,000. It will be depreciated using the straight-line depreciation over 8 years. Assume a tax rate of 20%.
Comment: This is the easiest depreciation method one percent per year.
- What is the book value of this asset at the end of years 1-8?
- What is the depreciation expense in each of the years 1-8?
- If the equipment can be sold for $5,000 at then end of Year 5, what is the after-tax salvage value?
- If the equipment can be sold for $80,000 at then end of Year 5, what is the after-tax salvage value?
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