The Rumpel Company purchased a felt press last year at a cost of $7,500. The machine is 5-year property with depreciation rates of 20%, 32%, and 19.2% in the first three years. The book value after three years is $2,160. The division manager reports that, for $12,000 (including installation), a new felt press can be bought. The new machine is also 5-year property and will have a book value of $5,760 at the end of two years. Two years after replacement, the old press can be sold for $200 and the new press will be worth $2,000. Taxes are 40%.

What is the incremental net salvage cash flow in the terminal year if the old press is replaced?

Answer rating: 100% (QA)

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