Your firm is analyzing a machine that will cost $22,000 and be fully depreciated after seven years of service at which...
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Your firm is analyzing a machine that will cost $22,000 and be fully depreciated after seven years of service at which time it will be sold. The salvage value of the machine is expected to be $8,000 at that time. What is the after-tax salvage value of the machine? Assume a corporate tax rate of 40%.
A. $7,200
B. $4,800
C. $8,800
D. $1,200
E. -$2,800
Homework Answers
After Tax CF = Salvage Value ( 1 - Tax rate )
= $ 8000 ( 1 - 0.4)
= $ 8000 * 0.6
= $ 4800
OPtion B is correct
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