A Machine Is Purchased for $575,000 and Is Used Through

question 38

Multiple Choice

A machine is purchased for $575,000 and is used through the end of Year 2. The machine will be depreciated using the 3-Year MACRS schedule. At the end of Year 2, the machine is sold for $75,000. What is the after-tax cash flow from the sale of the machine at the end of Year 2 if the firm's marginal tax rate is 35%?

• A)$42,608
• B)$15,916
• C)$32,392
• D)$63,663

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Definitions:

Total Variable Cost

The sum of expenses that vary with the level of output, including costs like materials and labor, which increase as production increases.

Average

A statistical measure central to a data set or distribution, typically the sum of all values divided by the number of values.

Variable Cost

Costs that change in proportion to the level of activity or production volume.

Payroll Taxes

Taxes imposed on employers and employees, calculated as a percentage of the wages that employers pay their staff.