Allen Air Lines is now in the terminal year of a project. The equipment originally cost $20 million, of which 80% has been depreciated.

Allen 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? Have to show work.

SOLUTION:Equipment's original costDepreciation (80%)Book value $20,000,00016,000,000$ 4,000,000 Gain on sale = $5,000,000 - $4,000,000 = $1,000,000.Tax on gain = $1,000,000 * 40% = $400,000....