Please solve, show work, and give detail explanation
Homework Answers
2.
Cost of equipment = 210600
MACRS Depreciation rate for the 5th year = 8.93%
Depreciation for the 5th year = 210600 * 8.93% = 18806.58
3.
Calculation of depreciation
| Cost of equipment | 16400 |
| Number of years | 4 |
| book value after 4 year | 2800 |
| Amount to be depreciated (16400-2800) | 13600 |
| Depreciation per year (13600/4) | 3400 |
Calculation of Profit on sale of equipment
| Sale price of equipment | 4500 |
| Book value of equipment | 2800 |
| Profit on sale (4500-2800) | 1700 |
Calculation of tax in year 4
| Operating cash flow | 33000 |
| less: depreciation | 3400 |
| add: profit on sale of asset | 1700 |
| Taxable Income (33000-3400+1700) | 31300 |
| Tax @ 35% (31300 * 35%) | 10955 |
Cash Flow for year 4
| Operating cash flow | 33000 |
| add : Sale of equipment | 4500 |
| less ; tax payable | 10955 |
| After tax Cash flow (33000+4500-10955) | 26545 |
| Add: working capital release | 5600 |
| Cash flow for year 4 (26545 + 5600) | 32145 |
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Please solve, show work, and give detail explanation
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