Calculate After-Tax Cash Flow at disposal.

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Reversing Rapids Co. purchases an asset for $177,690. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for $14,214.

Calculate After-Tax Cash Flow at disposal. Round the answer to two decimals.

Oct 5th, 2015

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Year Depreciation % Accumulated Depreciation
0 20% $35,538.00
1 32% $56,860.80
2 19.20% $34,116.48
3 11.52% $20,469.89
4 $146,985.17
Cost of machine $177,690.00
less: accumulated Depreciation $146,985.17
Book Value of machine at end 6 th year $324,675.17
Machine sold $14,214.00
Book Value of machine at end 6 th year -$324,675.17
loss on sale -$310,461.17
Tax shield of  loss on sale  @30% -$93,138.35
Cash flow after tax
Machine sold $14,214.00
add Tax shield @30% $93,138.35
After-Tax Cash Flow at disposal $107,352.35
Reversing Rapids Co.xlsx

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Oct 6th, 2015

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