Crafter's Supply purchased some fixed assets 2 years ago at a cost of $38,700.It no longer needs these assets so it is going to sell them today for $25,000.The assets are classified as 5-year property for MACRS.What is the net cash flow from this sale if the firm's tax rate is 30 percent? $$\begin{array}{l}
\text { MACRS 5-year property }\
\begin{array} { c c }
\frac { \text { Year } } { 1 } & \frac { \text { Rate } } { 20.00 \% } \
2 & 32.00 \% \
3 & 19.20 \% \
4 & 11.52 \% \
5 & 11.52 \% \
6 & 5.76 \%
\end{array}
\end{array}$$

Question

Crafter's Supply purchased some fixed assets 2 years ago at a cost of $38,700.It no longer needs these assets so it is going to sell them today for $25,000.The assets are classified as 5-year property for MACRS.What is the net cash flow from this sale if the firm's tax rate is 30 percent? $$\begin{array}{l}
\text { MACRS 5-year property }\
\begin{array} { c c } 
\frac { \text { Year } } { 1 } & \frac { \text { Rate } } { 20.00 \% } \
2 & 32.00 \% \
3 & 19.20 \% \
4 & 11.52 \% \
5 & 11.52 \% \
6 & 5.76 \%
\end{array}
\end{array}$$

Quizplus · Accepted Answer

Book value₂ = $38,700 × (1 - 0.20 - 0.32) = $18,576Aftertax salvage = $25,000 + [($18,576 - $25,000) × 0.30] = $23,072.80

Crafter's Supply Purchased Some Fixed Assets 2 Years Ago at a Cost