Salvage value after tax

[spazz 74]

Your firm needs a computerized machine tool lathe which costs $47,000 and requires $11,700 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 34 percent and a discount rate of 11 percent.

If the lathe can be sold for $4,700 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.)

Salvage value after tax

$

 

[JeffM]

Your firm needs a computerized machine tool lathe which costs $47,000 and requires $11,700 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 34 percent and a discount rate of 11 percent.

If the lathe can be sold for $4,700 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.)

Salvage value after tax

$

Well, rather obviously, the before-tax salvage value is $4,700.

Let a = the tax expense or tax benefit upon salvage, with a being negative if there is a tax expense.

So the after-tax salvage value = 4,700 + a.

 

[mmm4444bot]

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