Use the table below to answer this question. Year 20.00% 32.00% 2 11, 52% 6 576%

Question

Use the table below to answer this question. Year 20.00% 32.00% 2 11, 52% 6 576% Ronnie's Custom Cars purchased some fixed assets two years ago for $35,000. The assets are classified as 5-year property for MACRS. Ronnie is considering selling these assets now so he can buy some newer fixed assets which utilize the latest in technology. Ronnie has been offered $19,500 for his old assets. What is the net cash flow from the salvage value if the tax rate is 34 percent? O $18,582.0o O s16,800.00 O $19,500.00 O $16,297.20 O $14,926.32

Explanation / Answer

Book value as on date of sales=$35000(1-0.2-0.32)

=$16800

Hence gain on sales=(19500-16800)=$2700

Hence net cash flow=Sales proceeds-(Tax rate*gain on sales)

=19500-(2700*0.34)

=$18582.

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