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Question
Three years ago, Knox Glass purchased a machine for a three-year project. The machine is being depreciated straight-line to zero over a five-year period. Assume the firm decided to forego any bonus depreciation. Today, the project ended and the machine was sold. Which one of the following correctly defines the aftertax salvage value of that machine? (TCrepresents the relevant tax rate)
A) Sale price + (Sale price − Book value)(TC)
B) Sale price + (Sale price − Book value)(1 − TC)
C) Sale price + (Book value − Sale price)(TC)
D) Sale price + (Book value − Sale price)(1 − TC)
E) Sale price(1 − TC)
Answer
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