Rework Problem 12 11, assuming the following additional information For tax purposes, the entire cost of $30,000 can be depreciated according to a five year MACRS property class The firms marginal tax rate is 40 Data From Problem 12 11 A special purpose machine is to be purchased at a cost of $30,0...

Economic service life With i 12 and tax rate 40 Economic service life 1 year Tax Rate MARR Hol di ng ...

Rework Problem 12.11, assuming the following additional information: For tax purposes, the entire cost of $30,000 can

Question:

Rework Problem 12.11, assuming the following additional information:

For tax purposes, the entire cost of $30,000 can be depreciated according to a five-year MACRS property class.
The firm€™s marginal tax rate is 40%.

Data From Problem 12.11

A special-purpose machine is to be purchased at a cost of $30,000. The following table shows the expected annual operating and maintenance cost and the salvage value for each year of service: Year of Service O&M Cost Market Value $5,000 $25,800 $16,000 $6,500 $10,000 $10,000 $12,500 4 $5,000 $0 $14,800

If the interest rate is 12%, what is the economic service life for this machine?

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...

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