\"A firm purchases a new machine for $192,000. It borrows $76,800 at 3.7% annual
ID: 2510367 • Letter: #
Question
"A firm purchases a new machine for $192,000. It borrows $76,800 at 3.7% annual interest to be repaid in 2 years. The machine is depreciated using a 5-year MACRS. At the end of 3 years, the firm sells the machine for $84,000. The firm's tax rate is 33%. How much does the firm pay or save in taxes from selling this machine at the end of 3 years? In other words, what is the gains tax?
If the firm will have to pay taxes from selling this machine, enter your answer as a positive number. If the firm will save money in taxes from selling the machine, enter the answer as a negative number. "
Explanation / Answer
At the end of 3 years machine will have carrying value of ( 192000 *(1-.4)*(1-.4)*(1-.4))=41472
Depreciation rate is 40% that is (1/5)*2
Tax paid: 84000-41472=14034.2
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.