Chapter 7: Net Present Value and Capital Budgeting

Since the old equipment is sold at a price that is greater than its book value, the firm will record a capital gain on the sale, and this sale will be subject to the corporate tax rate. After-Tax Salvage Value = Sale Price – TC(Sale Price – Net Book Value) After-Tax Value of Sale of Old Equipment = $20,000,000 - 0.40($20,000,000-$12,000,000) ................
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