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VLD [36.1K]
3 years ago
9

Pet Supply purchased some fixed assets two years ago at a cost of $43,800. It no longer needs these assets so it is going to sel

l them today for $32,500. The assets are classified as five-year property for MACRS. The MACRS rates are 20%, 32% 19.2%, 11.52%, 11.52%, 5.76%, for years 1 to 6, respectively. What is the net cash flow (A-T Salvage Value) from this sale if the firm's tax rate is 35 percent
Business
2 answers:
DiKsa [7]3 years ago
6 0

Answer:

$28,483.4

Explanation:

The computation of the net cash flow is shown below;

Asset cost       $43,800

MACRS Rate 0.2 0.32

                     8760 14016

So total depreciation is

= $8,760 + $14,016

= $22,776

Now  

Book Value of the company is

= oriignal value - depreication

= $43,800 - $22,776

= $21,024

And,  

Sale price = 32500

So,  

Gain is

= $32,500 - $21,024

= $11,476

So,  

Tax = 0.35% of 11476

= $4,016

And, finally  

Net cashflows is

= Sale price - tax

= $28,483.4

nata0808 [166]3 years ago
3 0

Answer:

The correct solution is "28483".

Explanation:

According to the question,

Given:

Sales price,

= 32500

MARCS rates,

= 43800\times 0.2

= 8760

Or,

= 43800\times 0.32

= 14016

Now,

The total depreciation will be:

= 8760+14016

= 22776

The company's book value will be:

= Original \ value-Depreciation

= 43800-22776

= 21024

Gain will be:

= 32500-21024

= 11476

Tax,

= 35\times 11476

= 4016

hence,

The net cashflows will be:

= Sale \ price-Tax

= 32500-4016

= 28483

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