Four years ago omega technology, inc., acquired a machine to use in its computer chip manufacturing operations at a cost of $35,000,000. the firm expected the machine to have a seven-year useful life and a zero salvage value. the company has been using straight-line depreciation for the asset. due to the rapid rate of technological change in the industry, at the end of year 4, omega estimates that the machine is capable of generating (undiscounted) future cash flows of $11,000,000. based on the quoted market prices of similar assets, omega estimates the machine to have a fair value of $9,500,000.

The book value of an asset is the cost of an asset less the accumulated depreciation. Straight line deprecation distributes the depreciation expense evenly over the useful of the asset.

Straight line deprecation expense = (cost of the asset - salvage value) / useful life

$35,000,000 / 7 = $5,000,000

Book value = $35,000,000 - ($5,000,000 x 4) = $15,000,000

Here is the rest of the question: What is the machine’s book value at the end of Year 4?

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