The Jones Company has just completed the third year of a 5-year diminishing value recovery period for a piece of equipment it originally purchased for $ 297 000. The depreciation rate is 40%.
a. What is the book value of the equipment?
b. If Jones sells the equipment today for $ 79 000and its tax rate is 30 %, what is the after-tax cash flow from selling it?
c. Just before it is about to sell the equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if so, what is it Explain.? (Assume the new order will consume the remainder of the machine's useful life.)