After-tax cash flow
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Moore & Moore (MM) is considering the purchase of a new machine for $50,000, installed. MM will use the MACRS accelerated method to depreciate the machine, which is classified as 5-year property (see the following MACRS table for depreciation rates). MM expects to sell the machine at the end of its 4-year operating life for $10,000. If MM's marginal tax rate is 40%, what will the after-tax cash flow be when it disposes of the machine at the end of Year 4? (see attached)
a. $7,656
b. $8,059
c. $8,484
d. $8,930
e. $9,400
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Solution Summary
This provides the steps to calculate the after-tax cash flow
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After tax cash flow= Sales +/ -Loss/Tax on gain of sales
=10000-600
=$9400=Answer
Hence e. 9400
Note:
Net Book value of machine after four years= ...
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