Question
Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this
Arnold Company is acquiring a new machine with a life of 5 years for use on its production line. The following data relate to this purchase: The new machine would replace an old fully-amortized machine. The old machine can be sold for $15,000 at the time the new equipment is acquired. The income tax rate is 30%, and the discount rate is 12%. Arnold uses the straight-line method for amortization on all machines (ignore the half-year convention). Note: some amounts are rounded.
What is the present value of the terminal value (after tax)? Round to the nearest dollar.
Cost of new machine Annual cost savings in cash expenses Terminal value Maintenance required in the 4th year Book value of the old machine $100,000 45,000 8,000 5,000 20,000Step by Step Solution
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