Liberty Services Is Now at the End of the Final

Multiple Choice

Liberty Services is now at the end of the final year of a project.The equipment originally cost $26,500,of which 75% has been depreciated.The firm can sell the used equipment today for $6,000,and its tax rate is 40%.What is the equipment's after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment's final market value is less than its book value,the firm will receive a tax credit as a result of the sale.

A) $6,250
B) $6,125
C) $6,625
D) $5,563
E) $7,750