Salvage Rates and MACRS Depreciation: I thought salvage rates were not accounted for in MACRS...... but on our assignment our prof leaves a spot for Salvage Rate and tax impact on the sale of the equipment.....

Install Cost of $23,000,000 - and qualified as a seven year MACRS property. In five years, the equipment can be sold for $4,600,000. Company as a marginal tax rate of 35%.

I used the amount of depreciation from years 1-5 on my cash flow estimation table, but, I'm not sure what to do with the salvage rate? Can you provide some guidance on that?

Year Depreciation Amt % Dep Amt of Dep Book Value After Tax

1 $23,000,000 14.29% $3,286,700 $19,713,300

2 $23,000,000 24.49% $5,632,700 $14,080,600

3 $23,000,000 17.49% $4,022,700 $10,057,900

4 $23,000,000 12.49% $2,872,700 $7,185,200

5 $23,000,000 8.93% $2,053,900 $5,131,300 $4,785,955

6 $23,000,000 8.92% $2,051,600 $3,079,700

7 $23,000,000 8.93% $2,053,900 $1,025,800

8 $23,000,000 4.46% $1,025,800 $0