Question

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 21 percent and the discount rate is 14 percent. If the machine is sold today for $42,500, what will the aftertax salvage value be?

	A.	$31,794.72
	B.	$49,268.13
	C.	$38,439.13
	D.	$46,560.88 Kustom Cars purchased a fixed asset two years ago for $39,000 and sold it today for $19,000. The assets are classified as 5-year property for MACRS. The MACRS table values are 0.2000, 0.3200, 0.1920, 0.1152, 0.1152, and 0.0576 for Years 1 to 6, respectively. What is the net cash flow from the salvage value if the tax rate is 21 percent? $18,941 $18,020 $18,902 $19,000

Answer 1

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D. $46,560.88
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Please find below the answer
Statementshowing Computations
Paticulars	Amount
Cost of Machine	164,900.00
Life in years	8.00
Depreciation per year= 164900/8	20,612.50
Depreciation for 5 Years = 20,612.50*5	103,062.50
Carrying Value = 164900 - 103,062.50	61,837.50
Sale Value	42,500.00
Loss on Sale = 61,837.50 - 42,500	19,337.50
Tax savings on loss = 19337.50 *21%	4,060.88
aftertax salvage value = 42500 + 4060.88	46,560.88