Your firm needs a computerized machine tool lathe which costs $48,000 and requir

Question

Your firm needs a computerized machine tool lathe which costs $48,000 and requires $11,800 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35 percent and a discount rate of 12 percent.

If the lathe can be sold for $4,800 at the end of year 3, what is the after-tax salvage value?

If the lathe can be sold for $4,800 at the end of year 3, what is the after-tax salvage value?

Explanation / Answer

Book Value = 7.41%*48000 = $3556.80

The after-tax salvage value = 4800 - (4800-3556.80)*35% = $4364.88

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.