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...

a Depreciable basis 340000 50000 3900 ...

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

Question:

A company has collected the following information about a new machine that it is evaluating for possible investment:
Purchase price .................... $340,000
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 machine’s depreciable basis—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?

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...