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Cullumber Potions, Inc., a pharmaceutical company, bought a machine at a cost of $2 million five years ago that produces pain

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Answer #1

Book Value = $864,000

Selling Price = 1,000,000

Gain on Sale = $136,000

Tax on Gain = $34,000

Hence, cash flows = 1,000,000-34,000

= $966,000

Market Price = $600,000

Loss on Sale = $264,000

Tax Savings = $66,000

Hence, cash flows = 600,000+66,000

= $666,000

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