Question: Your firm needs a computerized machine tool lathe which costs $53,248 and requires $11,108 in maintenance expense for each year of its 5-year life. After

Your firm needs a computerized machine tool lathe which costs $53,248 and requires $11,108 in maintenance expense for each year of its 5-year life. After five years, this machine will be replaced. The machine falls into the MACRS (Links to an external site.) 5-year class life category. Assume a tax rate of 25 percent and a discount rate of 12 percent. If the lathe can be sold for $16,668 at the end of year 5, what is the after-tax salvage value? Below are the MACRS rates for the 5-year recovery period.

Year	MACRS Rate
1	20.00%
2	32.00%
3	19.20%
4	11.52%
5	11.52%
6	5.76%

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