Benny Inc. is purchasing a new machine for $120,000 that includes all shipping/installation costs. The piece...

Benny Inc. is purchasing a new machine for $120,000 that includes all shipping/installation costs. The piece of machinery falls within the 5-year MACRs depreciation class. Benny Inc. sold it after 4 years for $26,000. Their tax-rate is 30%

yr 1: 20%

yr 2: 32%

yr 3: 19.2%

yr 4: 11.52%

yr 5: 11.52%

yr 6: 5.76%

What is the after-tax salvage value? please show step by step solutions w/ formula

Solutions

Expert Solution

Book value as on date of sale=Cost-Accumulated Depreciation

=120,000*(1-0.2-0.32-0.192-0.1152)

=20736

Hence gain on sale=26000-20736

=$5264

After-tax salvage value=Sale proceeds-(Tax rate*Gain on sale)

=26000-(5264*30%)

=$24420.8

jeff jeffy answered 2 years ago

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