Question

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

Answer 1

Solution to Oorginal cost of equipment - $450,000 Depreciation to 4 year schedule of equipment to as per MACRS 7 year schedule Year | Depreciation Rate | Depreciation Basel Depreciation Armount 14,29%. $450,000 14.29x 450,000 = $64,305 s W N AS 24.49% $450,000 4.49 450,000 = $110,205 100 17.49.4. 10 12.49.4. $450,000 $450,000 17:49 x 450,000 =$78,705 12.49x450,000-$56,205 loo Accumulated Deprecation 120 Book value of Equipment at = = = = = the = end of = year 4. = = Original cost of Equipment - Accumulated Deprecation рь что 3 $450,000 – $309,420 = $140,580

Tax Rate = 32% of 0.22 Sale Price of equipment at the end of year 4 3 = $125,000 Now, we will calculate NSCE which means Net Salvage lash flow which is after tas salvage value. . NSCF = [SP - (SP-Bu]* Tax Rato7 Here, sopis Sale Price at the end of yeary B.V. = Book value at the end of yeary NSE NSCF = ($125,000 - ($125,000 - $140,560)* 0:22] = [ $125,000 - (-$15,580) 0.12] = $125,000 - (-$3427.6)] = $125,000 + $3,42706 = $ 128,427.6 Answer wer