Your firm needs a computerized machine tool lathe which costs $56,000 and requires $12,600 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, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent.If the lathe can be sold for $5,600 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.)Salvage Value after tax : S______.__

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Asked Nov 20, 2019
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Your firm needs a computerized machine tool lathe which costs $56,000 and requires $12,600 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, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent.

If the lathe can be sold for $5,600 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.)

Salvage Value after tax : S______.__

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Calculation of After-tax Salvage Value: The after-tax salvage value is $5.295.42 Excel Spreadsheet: А В 1 Cost of Machine $56,000 2 Accumulated Depreciation $51,850.40 $4,149.60 $5,600 $1,450.40 3 Book Value 4 Salvage Value Gain on Disposal 5 $304.58 6 Taxes at 21% 7 Aftertax Salvage Value S5,295.42 Excel Workings: А В 1 Cost of Machine 56000 2 Accumulated Depreciation =(33.33%+44.45%+14.81%)*B1 =B1-B2 5600 ЕB4-ВЗ -B5*21% 3 Book Value 4 Salvage Value 5 Gain on Disposal 6 Taxes at 21% 7 Aftertax Salvage Value B4-B6

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