1) Your firm needs a computerized machine tool lathe which costs $59000 and re

1) Your firm needs a computerized machine tool lathe which costs $59000 and requires $12900 in maintenance for each year of its 3-year life.
After three years this machine will be replaced. The machine falls into the MACRS 3-year class life
category. Assume a tax rate of 34 percent and a discount rate of 12 percent.

Calculate the depreciation tax shield for this project in year 3.

2)

Your firm needs a computerized machine tool lathe which costs $56000 and requires $12600 in maintenance for each year of its
3-year life. After three years this machine will be replaced. The machine falls into the MACRS 3-year
class life category. Assume a tax rate of 35 percent and a discount rate of 12 percent.

If the lathe can be sold for $5600 at the end of year 3 what is the after-tax salvage value?