The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $302,000. a. What is the book value of the equipment? b. If Jones sells the equipment today for $184,000 and its tax rate is 35%, what is the after-tax cash flow from selling it? c. Just before it is about to sell the equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if so, what is it? Explain. (Assume the new order will consume the remainder of the machine's useful life.) Note: Assume that the equipment is put into use in year 1.

c. Just before it is about to sell the equipment, Jones receives a new order. It can take the new order if it keeps the old equipment. Is there a cost to taking the order and if so, what is it?

the cost to taking the new order is the opportunity cost of selling the equipment, which is $63,065.60.

Explanation:

MACRS depreciation rate:

Year % Depreciation expense Carrying value

1 20% $60,400 $241,600

2 32% $96,640 $144,960

3 19.20% $57,984 $86,976

4 11.52% $34,790.40 $52,185.60

5 11.52% $34,790.40 $17,395.20

6 5.76% $17,395.20 $0