Please solve, show work, and give detail explanation
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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