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After-tax Salvage Value Suppose that ABC Company purchased $10000 of machinery 3 years ago

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After-tax Salvage Value

1. Suppose that ABC Company purchased $10000 of machinery 3 years ago. The machinery is 5-year MACRS property. The firm is selling this equipment today for $5000. What is the After-tax Salvage Value if the tax rate is 30%?

Comment: This follows a pattern: Selling Price of the depreciated asset - the remaining book value to get the gain or loss. Calculate the tax, then subtract the tax from the selling price to get the after-tax salvage value. 

1. Suppose that ABC Company purchased $10000 of machinery 4 years ago. The machinery is 5-year MACRS property. The firm is selling this equipment today for $5000. What is the After-tax Salvage Value if the tax rate is 30%?
2. Suppose that ABC Company purchased $10000 of machinery 5 years ago. The machinery is 5-year MACRS property. The firm is selling this equipment today for $5000. What is the After-tax Salvage Value if the tax rate is 30%?

The MACRS allowance percentages are as follows, commencing with year one: 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, 5.76%.

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