ZuoTi.Pro
Question

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

What is the expected after-tax cash flow from selling a piece of equipment if Litchfield Design purchases the equipment today for 50,000 dollars, the tax rate is 40 percent, the equipment is sold in 3 years for 8,000 dollars, and MACRS depreciation is used where the depreciation rates in years 1, 2, 3, 4, and 5 are 30 percent, 27 percent, 25 percent, 11 percent, and 7 percent, respectively?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Book value as on date of sale=Cost-Accumulated Depreciation

=50,000*(1-0.3-0.27-0.25)

=9000

Hence loss on sale=9000-8000=$1000

Hence after-tax cash flow=Sale proceeds+(Tax rate*loss on sale)

=8000+(1000*40%)

=$8400

0 0
Add a comment
Know the answer?
Add Answer to:
What is the expected after-tax cash flow from selling a piece of equipment if Litchfield Design...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 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?

  • Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...

    Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 260,000 dollars today. The equipment would be depreciated straight-line to 20,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 34,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 188,000 dollars and relevant costs are expected to be 58,000 dollars. The tax rate is 50 percent...

  • Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...

    Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 430,000 dollars today. The equipment would be depreciated straight-line to 10,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 24,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 262,000 dollars and relevant costs are expected to be 89,000 dollars. The tax rate is 50 percent...

  • Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected...

    Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 2? The project would require an initial investment in equipment of 650,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 41 percent, 24 percent, 24 percent, and 11 percent, respectively. At the end of the project in 2 years, the equipment would be sold for an expected...

  • Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected...

    Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 3? The project would require an initial investment in equipment of 650,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 38 percent, 24 percent, 24 percent, and 14 percent, respectively. At the end of the project in 3 years, the equipment would be sold for an expected...

  • Manzana Inc. is buying a piece of equipment. The equipment costs $3,000,000. The equipment is considered...

    Manzana Inc. is buying a piece of equipment. The equipment costs $3,000,000. The equipment is considered for tax purposes as a 5-year MACRS class. If the equipment is sold at the end of 6 years for $300,000, what is the after-tax cash flow from the sale of this asset (termination value of the equipment)? The marginal tax rate is 20 percent. The annual expense percentage for a 5-year MACRS property from year 1 to 6 respectively are: 20.00%; 32.00%; 19.20%;...

  • Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 500,000...

    Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 500,000 dollars and that is expected to last for 7 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 38 percent, 31 percent, 21 percent, and 10 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 830,000 dollars and relevant, incremental annual costs associated...

  • Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 100,000 dollars and that...

    Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 100,000 dollars and that is expected to last for 5 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 45 percent, 35 percent, 15 percent, and 5 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 155,000 dollars and relevant, incremental annual costs associated...

  • A company is evaluating the acquisition of a new piece of equipment. The base price of...

    A company is evaluating the acquisition of a new piece of equipment. The base price of the equipment is $100,000 and it will cost an additional $10,000 for shipping and installation. The company also paid a firm $5,000 to determine the feasibility of the new piece of equipment. The equipment falls in the MACRS 3 year class and would be sold after 4 years for $18,000. The new equipment would require an increase in inventory of $4,000, which will be...

  • Question 4 1 point Number Help Fairfax Pizza is evaluating a project that would require an...

    Question 4 1 point Number Help Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 400,000 dollars and that is expected to last for 9 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 38 percent, 34 percent, 19 percent, and 9 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 456,000 dollars...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT