Question

Phil's Diner purchased some new equipment two years ago for $118,679. Today, it is selling this...

Phil's Diner purchased some new equipment two years ago for $118,679. Today, it is selling this equipment for $80,947. What is the after-tax cash flow from this sale (in $) if the tax rate is 28 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.
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Cost of a Equipment = $ 118679

Year Applicable Rate Depreciation Amount
1 20% $ 118679*20%= $ 23735.8
2 32% $ 118679*30% = $ 35603.7
$61,713.08

Value of the Equipment after allowing the Depreciation = $ 118769-$ 61713.08 = $ 57055.92

Particulars Amount
Sale value of the Equipment $80,947
less: Book Value of the Equipment $57,055.92
Gain on sale of Equipment $23,891.08

Tax on Gain realized on sale of Equipment = $ 23891.08*0.28=$ 6689.50

Particulars Amount
Sale value $80,947
less: Tax on capital gains $6,689.50
Cash flow after tax $74,257.50

Hence Cash flow after tax is $ 74257.50

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Phil's Diner purchased some new equipment two years ago for $102,274. Today, it is selling this...
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.
ABC Company purchased a new machinery 4 years ago for $68,721. Today, it is selling this...
ABC Company purchased a new machinery 4 years ago for $68,721. Today, it is selling this equipment for $20,792. What is the after-tax salvage value if the tax rate is 23 percent? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
ABC, Inc purchased some new machinery three years ago for $270,743. Today, it is selling this...
ABC, Inc purchased some new machinery three years ago for $270,743. Today, it is selling this machinery for $40,214. What is the After-tax Salvage Value of the new machinery? Assume that the tax rate is 29%. The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
ABC Company purchased $96,171 of equipment 4 years ago. The equipment is 7-year MACRS property. The...
ABC Company purchased $96,171 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $4,624. What is the After-tax Salvage Value if the tax rate is 35%? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.
The equipment would cost $162,000 and would be classified as five-year property for MACRS. The equipment...
The equipment would cost $162,000 and would be classified as five-year property for MACRS. The equipment will be sold for $20,000 at the end of the project. Taking on the project would require the company add $10,000 in net working capital. Variable costs equal 67 percent of sales, fixed costs are $5,600, and the tax rate is 21 percent. Willie's paid a consultant $500 to determine the effect on sales over the five years if the equipment is purchased. The...
A company is considering the purchase of a $200,000 piece of equipment. The equipment is classified...
A company is considering the purchase of a $200,000 piece of equipment. The equipment is classified as 5-year MACRS property. The company expects to sell the equipment after five years at a price of $30,000. The relevant tax rate is 20%. What is the after-tax cash flow from this sale? MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76%
Manzana Inc. is buying a piece of equipment. The equipment costs $2,000,000. The equipment is considered...
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%;...
A company is considering a new 6-year project that will have annual sales of $207,000 and...
A company is considering a new 6-year project that will have annual sales of $207,000 and costs of $128,000. The project will require fixed assets of $247,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2?
King Nothing is evaluating a new 6-year project that will have annual sales of $425,000 and...
King Nothing is evaluating a new 6-year project that will have annual sales of $425,000 and costs of $293,000. The project will require fixed assets of $525,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 35 percent. What is the operating cash flow for Year 3?
A company is considering a new 6-year project that will have annual sales of $198,000 and...
A company is considering a new 6-year project that will have annual sales of $198,000 and costs of $122,000. The project will require fixed assets of $241,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2? Multiple Choice $65,892 $63,817 $76,381 $52,061 $59,599
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT