$16,569 c. $17,441 d. $18,359 e. $19,325 Marshall-Miller&Company; is considering
ID: 2658181 • Letter: #
Question
$16,569 c. $17,441 d. $18,359 e. $19,325 Marshall-Miller&Company; is considering the purchase of a new machine for $50,000, installed. The machine has a tax life of 5 years, and it can be depreciated according to the following rates. The firm expects to operate the machine for 4 years and then to sell it for $12.500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 4? 73. Depreciation Rate 0.20 0.32- 0.19 0.12 0.11 0.06 Year $8,878 b. $9,345 c. $9,837Explanation / Answer
Answer:
After Tax Salvage Value = SV – [(SV – BV) * Tax Rate]
Depreciation for Year 1 = $50,000 * 0.20 = $10,000
Depreciation for Year 2 = $50,000 * 0.32 = $16,000
Depreciation for Year 3 = $50,000 * 0.19 = $9,500
Depreciation for Year 4 = $50,000 * 0.12 = $6,000
Book Value at the end of 4th Year = $50,000 - $10,000 - $16,000 - $9,500 - $6,000
Book Value at the end of 4th Year = $8,500
After Tax Salvage Value = $12,500 – [($12,500 – $8,500) * 0.40]
After Tax Salvage Value = $12,500 – [$4,000 * 0.40]
After Tax Salvage Value = $12,500 – $1,600
After Tax Salvage Value = $10,900
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