Hunter's Lodge purchased $612,000 of equipment four years ago.The equipment is seven-year MACRS property.The firm is selling this equipment today for $174,500.What is the aftertax cash flow from this sale if the tax rate is 34 percent? The ACRS allowance percentages are as follows,commencing with Year 1:14.29,24.49,17.49,12.49,8.93,8.92,8.93,and 4.46 percent.

Question

Quizplus · Accepted Answer

The aftertax cash flow is calculated by finding the book value of the equipment, determining the gain or loss on the sale, and then applying the tax rate to the gain or loss. The accumulated depreciation over four years is calculated using the MACRS percentages, and the book value is subtracted from the sale price to find the gain or loss. The tax effect is then applied to this gain or loss to find the aftertax cash flow.

Hunter's Lodge Purchased $612,000 of Equipment Four Years Ago