The Olson Company plans to replace an old machine with a new one costing $85,000. The old

Question:

The Olson Company plans to replace an old machine with a new one costing $85,000. The old machine originally cost $55,000 and has 6 years of its expected 11-year life remaining. It has been depreciated straight line assuming zero and has a current market value of $24,000. Olson’s effective tax rate is 36%. Calculate the initial outlay associated with selling the old machine and acquiring the new one.

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...