Question

In: Accounting

You purchased a machine for $ 1.00$1.00 million three years ago and have been applying​ straight-line...

You purchased a machine for

$ 1.00$1.00

million three years ago and have been applying​ straight-line depreciation to zero for a​ seven-year life. Your tax rate is

25 %25%.

If you sell the machine today​ (after three years of​ depreciation) for

$ 700 comma 000$700,000​,

what is your incremental cash flow from selling the​ machine?

2.

The Jones Company has just completed the third year of a​ five-year MACRS recovery period for a piece of equipment it originally purchased for

$ 305 comma 000$305,000.

a. What is the book value of the​ equipment?

b. If Jones sells the equipment today for

$ 183 comma 000$183,000

and its tax rate is

35 %35%​,

what is the​ after-tax cash flow from selling​ it?

Note​:

Assume that the equipment is put into use in year 1.

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