Phil's Diner purchased some new equipment two years ago for $102,274. Today, it is selling this equipment for $81,604. What is the after-tax cash flow from this sale (in $) if the tax rate is 35 percent? The equipment falls in 5-year MACRS class. The MACRS allowance percentages are as follows, commencing with year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
To calculate after-tax Cash flow from this sale-
Book Value at of 2 year = Initial Cost - (Sum of % of depreciation Rate)
Book Value at of 2 year = $1,02,274 - (20% + 32%)
Book Value at of 2 year = $1,02,274 - 52%
Book Value at of 2 year = $49,091.52
Sales Value = $81,604
Tax on Gain on sale = 0.35 * ($81,604 - $49,091.52)
Tax on Gain on sale = $11,379.37
After Tax Cash Flow from this Sales is $81,604 - $11,379.37 = $70,224.63
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