You purchased a machine for $ 1.15 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40 %. If you sell the machine today (after three years of depreciation) for $ 793 comma 000 , what is your incremental cash flow from selling the machine? g

Question

Liam Walls

Business

22 December, 07:19

You purchased a machine for $ 1.15 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40 %. If you sell the machine today (after three years of depreciation) for $ 793 comma 000 , what is your incremental cash flow from selling the machine? g

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Answers (1)

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Phoebe · Answer 1

The incremental cash flow from selling the machine is $738,657

Explanation:

In order to calculate the incremental cash flow from selling the machine we would have to calculate the following formula:

incremental cash flow = sale price - (sale price - book value) * tax

Book value = $1,150,000 - $1,150,000/7*3

Book value = $657,142.86

Therefore, incremental cash flow = $793,000 - ($793,000-$657,142.86) * 40%

incremental cash flow = $738,657

The incremental cash flow from selling the machine is $738,657