Question
please solve for b
thanks
,(20 pts, total) A large, o over $75.000 new special tools for the value of 0 after 4 years of useful life. The net tnc plans to dispose it at the end of year 4. The company elects MACRS deprecia manufacture of finished plastic products. This tool costs with a) Determine the after cash flow for this investment by c fnhet income exceed $20 million is considering the purchase of a 000 with the expected salvage company expects the net incotne of 538,000 per year from this tool and method to sccelerate tax write off etial Before-Ta MACRS completing the table below (15 pts) YR Cash FlowDepreciation ncome (BTCF) Taxable Income (Dt) After Tax Tax Cash Flow (TI) ATCF) 6 4 (a) (5 pts) According to the tax rules regarding the disposal of a depreciated asset, if the market value is higher than the book value at the time of disposal, then the excess depreciation will be recaptured as taxable income and taxed as ordinary gain. On the other hand if the book value is higher than the market value, there is a loss on disposal and it is deducted from the taxable income. If the tool is sold for $20,000 in year 4, determine the cash flow after com 10 tax for year 4.
Explanation / Answer
b.
Book Value of equipment = 0
Sell price that is market value = $20,000
Tax rate = 35%.
After tax cash flow from sale of equipment = $20,000 × (1 - 35%)
= $13,000
After tax cash flow from sale of equipment is $13,000.
