Hammonds Fish Market purchased a $30,000 fork lift truck. It has a five-year useful life. The firms

Question:

Hammond’s Fish Market purchased a $30,000 fork lift truck. It has a five-year useful life. The firm’s tax rate is 25 percent.

a. If the fork lift is straight-line depreciated, what is the firm’s tax savings from depreciation?

b. What will be its book value (BV) at the end of year three?

c. Suppose the fork lift can be sold for $10,000 at the end of three years. What is its after-tax salvage value?

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...

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