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ABC, Inc. purchased an equipment at time=0 for $143,997. The shipping and installation costs were $22,105....

ABC, Inc. purchased an equipment at time=0 for $143,997. The shipping and installation costs were $22,105. The equipment is classified as a 7-year MACRS property. The investment in net working capital at time=0 was $15,017 which would be recouped at the end of the project. The project life is four years. At the end of the fourth year, the company will sell the equipment for $23,333. The annual cash flows are $89,718. What is the cash flow of the project in Year 4? That is solve for CF4. Assume that the tax rate is 24% The MACRS allowance percentages are as follows, starting with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Note: In the last year of the project, the Total Cash Flow = Operating Cash Flow + Terminal Cash Flow Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.

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Answer #1
Tax rate 24%
Calculation of annual depreciation
Depreciation Year-1 Year-2 Year-3 Year-4 Total
Cost 166102 166102 166102 166102
Dep Rate 14.29% 24.49% 17.49% 12.49%
Depreciation 23736 40678 29051 20746 114212
Calculation of after-tax salvage value
Cost of the machine (143997+22105) 166102
Depreciation 114212
WDV 51890
Sale price 23333
Profit/(Loss) -28557
Tax- 28557*24% -6854
Sale price after-tax 30187
Calculation of total cash flow at T4
Operating cash flow 89718
The sale price after tax- Machine 30187
Recovery of working capital 15017
Total cash flow 134922
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