Your firm needs a computerized machine tool lathe which costs $54,000 and requires $12,400 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 11 percent. If the lathe can be sold for $5,400 at the end of year 3, what is the after-tax salvage value?

$2467.49

Explanation:

As we know that MACRS 3-year class life category is: 33.33 percent, 44.44 percent, 14.82 percent, and 7.41 percent

We need to find the book value of the machine tool lathe, which is 3 years from now:

Book value = 54,000 - 54,000*33.33% - 54,000*44.44%  -  54,000*14.82 %

= $4,001.4

The tax will be based on the profit you have from selling the machine, so:

Therefore, our taxes are: $8398.6*0.35 = $2932.51

So, the after tax salvage value of the machine is the money you received on the sale minus the taxes you have to pay, that is:

Hope it will find you well.

client registration system, resource management system, clinical management system, patient information database, common use-system interface

explanation: