Marshall-Miller & Company is considering the purchase of a new machine for $60,000, installed. The machine has
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Question:
- Marshall-Miller & Company is considering the purchase of a new machine for $60,000, installed. The machine has a tax life of 5 years, and it can be depreciated according to the depreciation rates below. The firm expects to operate the machine for 5 years and then to sell it for $18,500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 5?
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
| MACRS % | 20% | 32% | 19% | 12% | 11% | 6% |
| Depreciation expense | 7,200 | |||||
| Book value | 48,000 | 3,600 | $0 |
If we sell at the end of year 5 for $18,500 then determine if we have a gain or a loss and the appropriate tax consequence
Explain answer and how to solve step by step, financial calculations, and fill out the chart too. Thanks.
Expert Answer:
To determine the aftertax salvage value when the machine is sold at the end of Year 5 we first need ... View the full answer
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