Answer:
terminal cash flow=$132,000
Explanation:
The depreciable cost using straight line depreciation can be expressed as;
depreciable cost=acquisition cost-salvage value
where;
acquisition cost=$21,000,000
salvage value=$0
replacing;
depreciable cost=(21,000,000-0)=$21,000,000
Annual depreciable cost=depreciable cost/life
where;
depreciable cost=$21,000,000
life=15 years
replacing;
annual depreciable cost=21,000,000/15=$1,400,000
Accumulated depreciation at point of sale=annual depreciable cost×service life=(1,400,000×8)=$11,200,000
Book value=acquisition cost-accumulated depreciation
book value=21,000,000-11,200,000=$9,800,000
At disposal;
net gain=selling price-book value
net gain=10,000,000-9,800,000=$200,000
terminal cash flow=net gain from disposal-tax
terminal cash flow=200,000-(34% of 200,000)=200,000-68,000
terminal cash flow=$132,000
