McPherson Company must purchase a new milling machine. The purchase price is $350,000, including installation. The machine has a tax life of 5 years, and it can be depreciated according to the following 5-year MACRS schedule. The firm expects to operate the machine for 4 years and then to sell it for $85,500. If the marginal tax rate is 25%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?

Year Depreciation Rate

1) 0.20

2) 0.32

3) 0.192

4) 0.1152

5) 0.1152

6) 0.0576

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