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    After tax salvage value

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    Marshall-Miller & Company is considering the purchase of a new machine for $50,000, installed. 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 $12,000. If the marginal tax rate is 40%, 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

    a. $12,600
    b. $9,800
    c. $13,100
    d. $10,600
    e. $10,400

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    The book value will be the depreciation of the last two years as ...

    Solution Summary

    The solution explains how to calculate the after tax salvage value.