Your Firm Needs a Computerized Machine Tool Lathe That Costs

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, $5,000 in freight charges, and another $12,000 in maintenance for each year of its three-year life. After three years, this machine will be replaced. The machine falls into the MACRS three-year class life category. Assume a tax rate of 30 percent and a discount rate of 12 percent. If the lathe can be sold for $7,000 at the end of year 3, what is the after-tax salvage value?

A) $6,499.35
B) $6,344.95
C) $5,999.45
D) $6,554.95

Correct Answer:

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