Your Firm Needs a Computerized Machine Tool Lathe That Costs

question 31

Multiple Choice

Your firm needs a computerized machine tool lathe that costs $50,000, requires $10,000 in installation, 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)$6,233.80
• B)$6,311.90
• C)$5,927.20
• D)$6,154.20

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