Farris Industrial purchased a machine 5 years ago at a cost of $229,380.The machine is being depreciated using the straight-line method over 8 years.The tax rate is 35 percent and the discount rate is 16 percent.If the machine is sold today for $74,500,what will be the after-tax salvage value?

Question

Quizplus · Accepted Answer

Book value = $229,380 − 5 × ($229,380 / 8)= $86,017.50
After-tax salvage value = $74,500 − 0.35 × ($74,500 − $86,017.50)= $78,531.13

Farris Industrial Purchased a Machine 5 Years Ago at a Cost