First we calculate the depreciation for full 7years period and along with book value at each period ended :-
Purchase price of asset = $4,250,000
years | MACR's rates | Depreciation for year(Purchase price * MACRs) | Book value at end of the year |
1 | 14.29% | $607,325.00 | $3,642,675.00 |
2 | 24.49% | $1,040,825.00 | $2,601,850.00 |
3 | 17.49% | $743,325.00 | $1,858,525.00 |
4 | 12.49% | $530,825.00 | $1,327,700.00 |
5 | 8.93% | $379,525.00 | $948,175.00 |
6 | 8.92% | $379,100.00 | $569,075.00 |
7 | 8.93% | $379,525.00 | $189,550.00 |
Calculate the book value and NSCF at end of year 5 :-
Book value at end of years (BV) =$ 948,175.00
NSCF:-
Sale value | 1,500,000.00 |
Less- Book value | 948,175.00 |
Gain on sale | 551,825.00 |
tax@21% on gain | 115,883.25 |
NSCF (sale value - tax) | 1,384,116.75 |
NSCF if assets sold at end of year 5 = $1,384,116.75
Calculate the book value and NSCF at end of year 6 :-
Book value at end of years (BV) =$ 569,075.00
NSCF:-
Sale value | 375,000.00 |
Less- Book value | $569,075.00 |
Gain / (loss) on sale | (194,075.00) |
tax/(tax shield) @21% on gain | (40,755.75) |
NSCF (sale value - tax) | 415,755.75 |
NSCF if assets sold at end of year 6 = $415,755.75
Wertheim Industries has purchased industrial equipment for a new project, at a value of $4.25 million....
Wertheim Industries has purchased industrial equipment for a new project, at a value of $4.25 million. The external accountants have advised the CFO to use the 7 yr class table in MACRS to depreciate the equipment. The CFO is conducting some simulations regarding the tax impact if the equipment is sold at varying dates during the project's life. The applicable tax rate is 21%. One simulation involves sale of the equipment for $1.5 million at the end of year 5;...
X-RAY TECHNOLOGIES purchased industrial equipment and is depreciating it using the 7-yr property class table. The original cost of the equipment was $450,000. The applicable tax rate for the company is 22%. 7-year year 14.29% 24.49% 17.49% 12.49% 4. 8.93% 8.92% 8.93% 4.46% At the end of year 4, the equipment was sold for $125,000 to upgrade to newer technology. What is the NSCF at the end of year 4? [NSCF = SP - (SP-BV) * Tax rate) Numeric Response
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