Problemyour firm needs a computerized machine tool lathe, Ask an Expert

Accounting

Problem:

Your firm needs a computerized machine tool lathe which costs $50,000, requires $10,000 in installation, $5,000 in freight charges and another $12,000 in maintenance for each year of its 3 year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 30% and a discount rate of 12%.

Required:

Question: If the lathe can be sold for $7,000 at the end of year 3, what is the after-tax salvage value?

$6,499.35
$6,344.95
$5,999.45
$6,554.95

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172410

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