Question

Pera Inc. is planning to buy a piece of equipment that can be used in a 8-year project. The equipment costs $4,000,000; has a tax life of 20 years, and is depreciated using the straight-line method. The equipment can be sold at the end of 8 years for $500,000. If the marginal tax rate is 20 percent, what is the after-tax cash flow from the sale of this asset (termination value of the equipment)?

Answer #1

1. Calculation of Depreciation on Equipment

= Equipment Price / Life of the project

= 4000000 /20

= 200000

2. Calulation of Book value of Equipment after 8 Years

= Equipment value - Accumulated depreciation

= 4000000 - (200000 x 8)

= 2400000

3. Loss on sale of Equipment

= Sale price - Book value

= 500000 - 2400000

Loss = 1900000

4. Tax saving on loss on sale of equipment

= 1900000 x 0.20

= 380000

5.After Tax cash flow

= Sale proceed +Tax Benefit on Equipment

= 500000 + 380000

**= 880000.**

Pera Inc. is planning to buy a piece of equipment that can be
used in a 7-year project. The equipment costs $1,000,000; has a tax
life of 10 years, and is depreciated using the straight-line
method. The equipment can be sold at the end of 7 years for
$400,000. If the marginal tax rate is 40 percent, what is the
after-tax cash flow from the sale of this asset (termination value
of the equipment)?
In entering your answer, do not...

x Corp. wants to buy a machine that can be used in a 10-year
project. The machine costs $1,000,000; has a tax life of 10 years,
and is depreciated using the straight-line method. The machine can
be sold at the end of 10 years for $400,000. If the marginal tax
rate is 20 percent, what is the after-tax cash flow from the sale
of this asset (termination value of the machine)?

Manzana Inc. is buying a piece of equipment. The equipment costs
$2,000,000. 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%;...

Bricktops Inc. purchased a piece of equipment for $45,000,000
for a project that is expected to last 8 years. Equipment will be
depreciated using 10 year straight line depreciation. At the end of
year 8, the company can sell the equipment for $10,000,000. The tax
rate is 30%. What is the approximate after-tax salvage value of
this equipment?

What is the salvage cash flow for a piece of equipment given the
following information. The equipment had an initial book value of
$209,000. The asset was set up to be depreciated straight-line for
8 years to a book value of 0. The equipment can be sold today for
$62,000. Depreciation has been taken for 6 years. The firm's tax
rate is 31%. (Enter your answer with a decimal point.

Sengupta Inc. just purchased some equipment which has a
depreciable life of 7 years. The equipment cost $1,720,000 and will
be used in a project with a 4 year lifespan. At the end of the
project, the equipment will be sold for market value of $450,000 at
the end of year 5. The equipment will be depreciated using the
straight-line method. Assume the firm has a 30% marginal tax rate
and the equipment will be used in a project that...

Carolina Inc. is deciding whether to buy or lease a piece of
equipment. Analyst estimated the CFs associated with both options.
Equipment can be purchased for $100,000, it will last for 10 years
and will be depreciated straight line to zero (no residual value).
Alternatively, Carolina can lease this equipment at $14,000 per
year. Since this is true tax lease, Carolina can deduct lease
payments as an operating expense when they are paid.
If Carolina’s borrowing rate is 7% and...

Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 340,000 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 212,000 dollars
and relevant costs are expected to be 111,000 dollars. The tax rate
is 50 percent...

Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 190,000 dollars today.
The equipment would be depreciated straight-line to 30,000 dollars
over 2 years. In 3 years, the equipment would be sold for an
after-tax cash flow of 43,000 dollars. In each of the 3 years of
the project, relevant revenues are expected to be 156,000 dollars
and relevant costs are expected to be 41,000 dollars. The tax rate
is 50 percent...

Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 430,000 dollars today.
The equipment would be depreciated straight-line to 40,000 dollars
over 2 years. In 3 years, the equipment would be sold for an
after-tax cash flow of 53,000 dollars. In each of the 3 years of
the project, relevant revenues are expected to be 303,000 dollars
and relevant costs are expected to be 90,000 dollars. The tax rate
is 50 percent...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 4 minutes ago

asked 32 minutes ago

asked 35 minutes ago

asked 41 minutes ago

asked 46 minutes ago

asked 49 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago