Five years ago, the Mori Foods Company acquired a bean processing machine. The machine cost $30,000 and

Question:

Five years ago, the Mori Foods Company acquired a bean processing machine. The machine cost $30,000 and is being depreciated using the straight-line method over a 10-year period to an estimated of $0. A new, improved processor is now available, and the firm is considering making a switch. The firm’s marginal tax rate is 40 percent. What are the after-tax cash flow effects of selling the old processing unit if it can be sold for the following prices?
a. $15,000
b. $5,000
c. $26,000
d. $32,000

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...