Cost recovery. Brock Florist Company bought a new delivery truck for $29,000. It

Question

Cost recovery. Brock Florist Company bought a new delivery truck for $29,000. It was classifiled as a light-duty truck. The company sold its years of service. If a five-year life and MACRS rate) if a. the sales price was $15,0007 b. the sales price was $9,000? c. the sales price was $5,000? a. If the sales price was $15,000, what would be the after-tax cash flow? st(Round to the nearest cent.) b. If the sales price was $9,000, what would be the after-tax cash flow? ht.) c- lf the sales price was S5,000, what would be the after-tax cash flow? (Round to the nearest cent) Enter your answer in each of the answer boxes

Explanation / Answer

Using MACRS 5-year schedule, the accumulated depreciation for 3-years = 71.2%

Book Value of the asset after 3-years = 29,000 x (1 - 71.2%) = 8,352

a) After-tax cash flow = (15,000 - 8,352) x (-40%) + 15,000 = 12,340.8

b) After-tax cash flow = (9,000 - 8,352) x (-40%) + 9,000 = 8,740.8

c) After-tax cash flow = (5,000 - 8,352) x (-40%) + 5,000 = 6,340.8

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