Your firm purchased machinery with a 7-year MACRS life for $10.30 million. The project, however, will end after 5 years. If the equipment can be sold for $4.80 million at the completion of the project, and your firmâs tax rate is 30%, what is the after-tax cash flow from the sale of the machinery? Use the MACRS depreciation schedule. (Enter your answer in dollars, not in millions.)
After-tax cash flow $
| Your firm purchased machinery with a 7-year MACRS life for $10.30 million. The project, however, will end after 5 years. If the equipment can be sold for $4.80 million at the completion of the project, and your firmâs tax rate is 30%, what is the after-tax cash flow from the sale of the machinery? Use the MACRS depreciation schedule. (Enter your answer in dollars, not in millions.) |
| After-tax cash flow | $ |
Related questions
| Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years for $536,000. The firm believes that working capital at each date must be maintained at a level of 10% of next yearâs forecast sales. The firm estimates production costs equal to $1.10 per trap and believes that the traps can be sold for $5 each. Sales forecasts are given in the following table. The project will come to an end in 6 years., when the trap becomes technologically obsolete. The firmâs tax bracket is 35%, and the required rate of return on the project is 10%. Use the MACRS depreciation schedule. |
| Year: | 0 | 1 | 2 | 3 | 4 | 5 | 6 | Thereafter |
| Sales (millions of traps) | 0 | .5 | .7 | .8 | .8 | .6 | .5 | 0 |
| a. | What is project NPV? (Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.) |
| NPV | $ million |
| b. | By how much would NPV increase if the firm depreciated its investment using the 5-year MACRS schedule? (Do not round intermediate calculations. Enter your answer in whole dollars not in millions.) |
| The NPV increases by $ . |
