Farris Industrial purchased a machine five years ago at a cost of $164,900.The machine is being depreciated using the straight-line method over eight years.The tax rate is 35 percent and the discount rate is 14 percent.If the machine is sold today for $42,500,what will the aftertax salvage value be?

Question

Quizplus · Accepted Answer

Book value = $164,900 - 5 × ($164,900/8)= $61,837.50Aftertax salvage value = $42,500 - .35 × ($42,500 - 61,837.50)= $49,268.13

Farris Industrial Purchased a Machine Five Years Ago at a Cost