Your Firm Needs a Computerized Machine Tool Lathe That Costs

question 110

Multiple Choice

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

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the amount of it that consumers are willing to purchase at different prices.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a specified period.

Supply of Baby Formula

The total quantity of infant milk products available for consumption in a market at a given time.

Supply Curve

A graph showing the relationship between the price of a good and the quantity of the good that sellers are willing to supply.