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What is the expected after-tax cash flow from selling a piece of equipment if Platinum Water...

What is the expected after-tax cash flow from selling a piece of equipment if Platinum Water Recycling purchases the equipment today for 51,500 dollars, the tax rate is 40 percent, the equipment will be sold in 6 years for 16,000 dollars, and the equipment will be depreciated to 13,000 dollars over 11 years using straight-line depreciation?

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Answer #1

Profit from Sale = Sale Price - Book Value

= $ 16,000 - $ 13,000

= $ 3000

Profit on tax = Profit * tax

= $ 3000 * 40%

= $ 1200

After Tax CF = Sale Price - Profit on Tax

= $ 16,000 - $ 1200
= $ 14,800

After Tax CF from sale is $ 14,800

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