Question 31 1 pts You are considering two machines, A and B that can be used for

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Question 31 1 pts You are considering two machines, A and B that can be used for the same purpose. Machine A costs $250,000, will reduce costs by $70,000 per year, needs net working capital of $20,000 at time zero which be released at the end of the project, has a 5 year straight line depreciable life and can be sold at the end of the project's life for $50,000. Machine B costs $320,000, will reduce costs by the same $70.000 per year, has net working capital of $40,000 at time zero (also released at the end of its life), has a ten year straight line depreciable life and can be sold at the end of its life for $60,000. Assume that the tax rate is 34% and the discount rate is 10%, what are the after tax salvage values for project A and B at the end of their lives? Don't include the annual operating cash flows in this calculation, just the salvage value plus or minus any tax benefit or liability $50,000 for A and $60,000 for B O $33,000 for A and $39,600 for B O $17,000 for A and $20,400 for B O $23,000 for A and $43,100 for B $40,000 for A and $50,000 for B

Explanation / Answer

Option b is correct
Salvage value of Machine A = Savage Value * ( 1-tax rate) = 50,000 * ( 1-34%) = 33,000
Salvage value of Machine B = Savage Value * ( 1-tax rate) = 60,000 * ( 1-34%) = 39,600

Best of Luck. God Bless

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