Answer:
$2,288,448
Explanation:
In order to calculate after-tax salvage value we first compute depreciation as per MACRS 5 year class.
MACRS 5 years states that following depreciation is chargeable in corresponding years,
Year 1 = 20%
Year 2 = 32%
Year 3 = 19.2%
Year 4 = 11.52%
We now calculate total depreciation on asset over the useful life of 4 years.
DEP Y1 = 9,000,000 * 0.20 = $1,800,000
DEP Y2 = 9,000,000 * 0.32 = $2,880,000
DEP Y3 = 9,000,000 * 0.192 = $1,728,000
DEP Y4 = 9,000,000 * 0.1152 = $1,036,800
We can now calculate Net book value at the end of 4th year
NBV = 9,000,000 - 1,800,000 - 2,880,000 - 1,728,000 - 1,036,800
NBV = $1,555,200
Taxable value = Sale price - NBV
Taxable value = 2,520,000 - 1,555,200 = $964,800
Tax = $964,800 * 0.24 = $231,552
After tax salvage value = 2,520,000 - 231,552 = $2,288,448
Hope that helps.
