Gravy Train Exporters paid cash for a new packaging machine that cost $999,000 f

Question

Gravy Train Exporters paid cash for a new packaging machine that cost $999,000 fifteen years ago. Three years ago, the firm spent $6,900 on repairs and modifications to the machine. The machine is now fully depreciated and has just sat idly in a back corner of the shop for the past 2 months. The estimated value that machine could be sold for today is $30,000. The company’s marginal tax rate is 30%. The firm is considering using this machine in a new project. If it does so, what value should be assigned to this machine and included in the initial costs of the new project?

A. $0

B. $30,000

C. $992,100

D. $999,999

E. $1,005,900

Explanation / Answer

Tha value to be assigned should be 0. As the machine is fully depreciated and no book value exists.
So the value assigned should be nil and it will also not be sold at present salvage value.

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