Question
In: Finance
You purchased a machine for $1.13 million three years ago and have been applying straight-line depreciation...
You purchased a machine for $1.13 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 22% . If you sell the machine today (after three years of depreciation) for $778,000 , what is your incremental cash flow from selling the machine?
Solutions
Expert Solution
Incremental cash flow = Market value - tax(Market value - Book value)
Annual deprication = 1,130,000/7 = 161,428.57
Accumulated depreciation = 161,428.57*3 = 484,285.71
Book value after year 3 = 1,130,000 - 484,285.71 = 645,714.29
Incremental cash flow = 778,000 - 22%(778,000 - 645,714.29)
Incremental cash flow = 778,000 - 29,102.86
Incremental cash flow = 748,897.14
jeff jeffy answered 2 years agoRelated Solutions
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