Question 17

Boyertown Industrial Tools is considering a 2-year project to improve its production efficiency. They have spent $25,000 over the previous year researching a new machine press. Buying the new machine press for $500,000 is estimated to result in $300,000 in annual pretax cost savings and will provide quarterly dividends of $2,500 to the shareholders. The press falls in the MACRS three-year class, and it will have a salvage value at the end of the project of $100,000. The press also requires an initial investment in spare parts inventory of $50,000, along with an additional $5,000 in inventory for each succeeding year of the project. If the tax rate is 35, what is the aftertax salvage value for the machine press? Property Class

Year 3Year 5 year 7 year

1 33.33 20.00 14.29

2 44.45 32.00 24.49

3 14.81 19.20 17.49

4 7.41 11.52 12.49

5 11.52 8.93

6 5.76 8.92

7 8.93

8 4.46

Table 9.7 Modified ACRS depreciation allowances

Group of answer choices

$96,115

$100,000

$103,885

$107,245

$111,100