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7 year MACRS calculations

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Your firm purchased machinery with a 7-year MACRS life for $10 million. The project, however, will end after 5 year. If the equipment can be sold for $4.5 million at the completion of the project, and your firm's tax rate is 35 percent, what is the after-tax cash flow from the sale of machinery?

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Solution Summary

Shows how to calculate the after tax cash flow from sale of an asset before its MACRS life.

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The depreciation under 7 year MACRS in year 6, 7 and 8 is 8.92%, 8.93% and 4.46%.
Hence the machinery will be written down to 22.31% of its ...

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