# Question

A company has collected the following information about a new machine that it is evaluating for possible investment:

Purchase price .................... $340,000

Salvage value at the end of three years ........... $ 15,000

Shipping and installation ............... $ 50,000

Book value at the end of three years ............ $ 5,000

Marginal tax rate ................... 40%

a. What is the machineâ€™s depreciable basisâ€”that is, the amount that can be depreciated during its life?

b. In three years, what will be the net cash flow generated by the disposal of the machine?

Purchase price .................... $340,000

Salvage value at the end of three years ........... $ 15,000

Shipping and installation ............... $ 50,000

Book value at the end of three years ............ $ 5,000

Marginal tax rate ................... 40%

a. What is the machineâ€™s depreciable basisâ€”that is, the amount that can be depreciated during its life?

b. In three years, what will be the net cash flow generated by the disposal of the machine?

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