Question

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 consultants esimates of yearly sales increases and MACRS depreciation allowance percentages are provided in table below.

Year	1	2	3	4	5	6
Sales ($)	42,000	44,500	45,600	48,900	52,000
MACRS rates	20.00	32.00	19.20	11.52	11.52	5.76

What is the net cash flow from the sale of the asset that would be included in the final year cash flow estimate?

Answer 1