Your firm needs a computerized machine tool lathe which costs $40,000 and requir
ID: 2739935 • Letter: Y
Question
Your firm needs a computerized machine tool lathe which costs $40,000 and requires $11,000 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 39 percent and a discount rate of 13 percent.
If the lathe can be sold for $4,000 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.)
Your firm needs a computerized machine tool lathe which costs $40,000 and requires $11,000 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 39 percent and a discount rate of 13 percent.
Explanation / Answer
The after tax salvage value of the lathe will be 61% of 4,000 or $ 2,440.
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