Ope r ating Cash Fl o ws. Talia’s Tutus bought a new sewing machine ...

Question

Ope    r    ating      Cash      Fl    o    ws.    Talia’s  Tutus  bought  a  new  sewing  machine  for  $40,000  that  will  be  depreciated  using  the  MACRS  depreciation  schedule  for  a  5-year  recovery  period. a.  Find  the  depreciation  charge  each  year. b.    If  the  sewing  machine  is  sold  after  3  years  for  $20,000,  what  will  be  the  after-tax  pro-  ceeds  on  the  sale  if  the  firm’s  tax  bracket  is  35  percent?

Robert · Accepted Answer

After tax Proceeds = Sale Price – ((Sale Price – Book Value) * Tax Rate) 
After tax Proceeds = $20,000 – (($20,000 - $11,520) * 35%) 
After tax Proceeds = $17,032

Ope r ating Cash Fl o ws. Talia’s Tutus bought a new sewing machine for $40,000 that will be depreciated using the MACRS depreciation schedule for a 5-year recovery period. a. Find the depreciation...

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