A Machine has an initial cost of $200,000 and was estimated to have a salvage value of

Question:

A Machine has an initial cost of $200,000 and was estimated to have a salvage value of $10,000 at the end of its 7 years useful life. The machine is expected to generate annual net savings of $62,000, a loan of $80,000 at 10% interest will help fund the purchase. The loan is to be repaid in seven equal annual installments including interest. The firm’s marginal income tax rate is 39% the equipment qualifies for MACRS 5-years property

Calculate the interest on loan for each year Using MACRS-GDS depreciation (5-yrs property) calculate the after tax cash flows

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...