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Suppose a project requires purchasing equipment worth $10m. After 4 years the equipment will be sold...

  1. Suppose a project requires purchasing equipment worth $10m. After 4 years the equipment will be sold for $2 m. Calculate after-tax cash flow associated with the sale of the equipment if corporate tax rate is 35%.

Assume the equipment needed for the project is depreciated according to MACRS 5-year depreciation schedule:

5-year MACRS:

Year 0: 20%

Year 1: 32.0%

Year 2: 19.2%

Year 3: 11.52%

Year 4: 11.52%

Year 5:   5.76%

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