Answer:
Option (d) is correct.
Explanation:
Net sales:
= Selling price - Selling cost
= $5,100,000 - (0.03 × $5,100,000)
= $5,100,000 - $153,000
= $4,947,000
Gain on sale:
= Net sales - (Cost - Depreciation)
= $4,947,000 - [$4,820,000 - (5 × $153,016)]
= $4,947,000 - ($4,820,000 - $765,080)
= $4,947,000 - $4,054,920
= $892,080
Tax on capital gain:
= Tax rate × Gain on sale
= 0.28 × $892,080
= $249,782.40
After-tax cash flow from sale of the property:
= Net sales - Tax on capital gain - Mortgage balance
= $4,947,000 - $249,782.40 - $3,600,000
= $1,097,218