A mining corporation purchased $120,000 of production machinery and depreciated it using SOYD depreciation, a 5 year depreciable life, and zero salvage value The corporation is a profitable one that has a 34 incremental tax rate At the end of 5 years the mining company changed its method of operati...

Year B n1 Factor Dep Bn 1 12000000 033 4000000 8000000 2 8000000 027 3200 ...

A mining corporation purchased $120,000 of production machinery and depreciated it using SOYD depreciation, a 5-year depreciable

Question:

A mining purchased $120,000 of production machinery and depreciated it using SOYD depreciation, a 5-year depreciable life, and zero . The is a profitable one that has a 34% incremental tax rate.
At the end of 5 years the mining company changed its method of operation and sold the production machinery for $40,000. During the 5' years the machinery was used, it reduced mine operating costs by $32,000 a year, before taxes. If the company is 12% after taxes, was the investment in the machinery a satisfactory one?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
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