Question

In: Finance

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
Next > < Previous

Related Solutions

BSU Inc. wants to purchase a new machine for $33,680, excluding $1,300 of installation costs. The...
BSU Inc. wants to purchase a new machine for $33,680, excluding $1,300 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,100, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $8,000 each year of its economic life. The straight-line depreciation method would be used for the new...
Valles Global Industries (VGI) is considering purchasing a new 3-D prototyping machine that costs $650,000. Installation...
Valles Global Industries (VGI) is considering purchasing a new 3-D prototyping machine that costs $650,000. Installation costs $85,000.   a) If they borrow money at 12%, how many hours a month must be rented at $150 per hour to unsuspecting users so they exactly cover their purchase and loan costs? Use a three-year life. b) Recently, VGI discovered a new lender who will lend them money at 8%. This lender wants VGI to pay them 20% of each month’s rental over...
ABC, Inc. purchased an equipment at time=0 for $53,474. The shipping and installation costs were $23,977....
ABC, Inc. purchased an equipment at time=0 for $53,474. The shipping and installation costs were $23,977. The equipment is classified as a 5-year MACRS property. The investment in net working capital at time=0 was $5,040 which would be recouped at the end of the project. The project life is five years. At the end of the fifth year, the company will sell the equipment for $43,842. The annual cash flows are $43,724. What is the cash flow of the project...
Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs...
Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $50,000 and requires installation costs of $2,500. This outlay would be partially offset by the sale of an existing gluer. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $15,000. The existing gluer has a remaining useful life of five years. If held until year...
At the beginning of 2010, Lipstick Company has installation costs of $8,000 on new machine that...
At the beginning of 2010, Lipstick Company has installation costs of $8,000 on new machine that were charged to Repair Expense. Other costs of this machinery of $29,000 were correctly recorded and depreciate with the straight-line method with an estimated life of 10 years and no residual value. At December 31, 2008, Lipstick Company decides that the machinery has remaining useful life of 15 years, starting with January 1, 2011. The book have not been closed for 2018 and depreciation...
At the beginning of 2010, Lipstick Company has installation costs of $8,000 on new machine that...
At the beginning of 2010, Lipstick Company has installation costs of $8,000 on new machine that were charged to Repair Expense. Other costs of this machine of $29,000 were correctly recorded and depreciate with the straight-line method with an estimated life of 10 years and no residual value. At December 31, 2008, Lipstick Company decides that the machinery has remaining useful life of 15 years, starting with January 1, 2011. The book have not been closed for 2011 and depreciation...
123 Inc. is considering purchasing a new machine. The machine will cost $3,250,000. The machine will...
123 Inc. is considering purchasing a new machine. The machine will cost $3,250,000. The machine will be used for a project that lasts 3 years. The expected salvage of the machine at the end of the project is $800,000. The machine will be used to produce widgets. The marketing department has forecasted that the company will be able to sell 280,000 widgets per year. The marketing department believes that the company will be able to charge $22 per widget. The...
Mystic Beverage Company is considering purchasing a new bottling machine. The new machine costs $165,124, plus...
Mystic Beverage Company is considering purchasing a new bottling machine. The new machine costs $165,124, plus installation fees of $13,539 and will generate earning before interest and taxes of $84,143 per year over its 6-year life. The machine will be depreciated on a straight-line basis over its 6-year life to an estimated salvage value of 0. Mystic’s marginal tax rate is 0%. Mystic will require $27,354 in NWC if the machine is purchased. Determine the annual cash flow in year...
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will...
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will generate revenues of $100,000 per year for five years. The cost of materials and labour needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s...
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will...
Rocky Mountain Sports Ltd is considering purchasing a new machine that costs $60,000. The machine will generate revenues of $100,000 per year for five years. The cost of materials and labour needed to generate these revenues will total $60,000 per year, and other cash expenses will be $10,000 per year. The machine is expected to sell for $2,500 at the end of its five-year life and will be depreciated on a straight-line basis over five years to zero. Rocky Mountain’s...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT