Question
QUESTION 19 2 points A company is considering a 5-year project to expand production with the purchase of a new automated machine using the latest technology The new machine would cost $210 000 FOB St. Louis, with a shipping cost of $8,000 to the plant location. Installation expenses of $12,000 would also be required. This new machine would be classified as 7-year property for depreciation purposes. The project engineers anticipate that this equipment could be sold for salvage for $56000 at the end of the project if the corporate tax rate is 28%, what is the after tax salvage cash flow for this new machine at the end of the project? (Answer to the nearest dollar.) MACRS percentages for depreciation each year are as follows Year % 1 14.29 2 24.49 3 17.49 4 12.49 5 8.93 6 8.93 7 8.93 8 4.45
Explanation / Answer
Asset cost $ 230,000 210000+8000+12000 Less: Depreciatioon charged $ 178,687 230000*(0.1429+0.2449+0.1749+0.1249+0.0893) WDV of machine at the time of sale $ 51,313 Sale value of machine $ 56,000 Profit on sale $ 4,687 Less: Tax on sale @ 28% $ 1,312 After tax cash flows from sale of asset $ 54,688