Felicity Manufacturing

The president of Felicity Manufacturing Company, headquartered in Dallas, has asked you to evaluate the proposed acquisition of an overhead pulley system. The pulley system costs $85,000. It will require an increase in net operating working capital (spare parts inventory) of $7,500, and this cash outflow is assumed to occur at the time of the initial investment. Furthermore, assume that the pulley system falls into the MACRS three-year property class. It will be sold after three years for $30,000. The purchase of the pulley system will have no effect on revenues, but it is expected to save Felicity $42,000 in annual pretax cost savings. The marginal tax rate is 32%. What is the pulley systems after-tax salvage value at the end of Year 3?

	a.	$22,415.52
	b.	$66,234.52
	c.	$11,202.52
	d.	$48,730.50
	e.	$28,560.52