Business & Finance

[kashauna1077]

Carter Air Lines is now in the terminal year of a project. The equipment originally cost $20 million, of which 80% has been depreciated. Carter can sell the used equipment today to another airline for $5 million, and its tax rate is 40%. What is the equipment's after-tax net salvage value? Should they sell it? Why or why not?

[sara3]

ffs

[Lakitu]

Would it be better if we talked you how to do these kind of calculations rather than tell you what the answer is outright?

[factor-fiction]

Just a guess but maybe the $20m asset is now worth only $4m. If it sells for $5m, the proceeds after paying tax at 40% will be only $3m- which is less than the $4m net worth, so they shouldn't sell.
Does this match up with what you did at your lectures kashauna?