Problem
McPherson Company must purchase a new milling machine. The purchase price is $50,000, including installation. The machine has a tax life of 5 years, and it can be depreciated according to the following rates. The firm expects to operate the machine for 4 years and then to sell it for $12,500. If the marginal tax rate is 25%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?
|
Year
|
Depreciation Rate
|
|
1
|
0.20
|
|
2
|
0.32
|
|
3
|
0.19
|
|
4
|
0.12
|
|
5
|
0.11
|
|
6
|
0.06
|