You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $194,000. The trucks fall in the MACRS 5-year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 29,100 at the end of five years. The expected revenue associated with the trucks is $155,000 per year with annual operating costs of $81,000. The firm's marginal tax rate is 25.0%. What is the after-tax cash flow associated with the sale of the equipment

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Tutorconsortium33go Tutorconsortium33go · Answer 1

The after-tax cash flow associated with the sale of equipment is $299,325.

The initial cost is the typical cost of buying or producing the goods you have on hand.

Operating costs, often known as operating costs, are the costs associated with running a company, or with running a machine, part, piece of equipment, or facility.
They represent the cost of the resources an organization uses just to stay in business.

The actual or fictitious movement of money is known as cash flow.
In finance and accounting, cash flow describes the capital inflows and outflows of particular economic units with the aim of achieving a particular goal within a predetermined window of time.
Making an accurate prediction of future cash flows is required in accounting in addition to measuring current cash flows.

Revenue of 5 years [tex]= 155000 * 5 = 775000[/tex].

Operating cost of 5 years [tex]= 81000 * 5 = 405000[/tex].

Sale of equipment [tex]= 29100[/tex].

Net profit = [tex]775000+29100 - 405000=399100[/tex].

Tax to be deducted at 25% [tex]= 99775[/tex].

Cash flow after tax [tex]399100-99775=299325[/tex].

Therefore, the after-tax cash flow associated with the sale of equipment is $299,325.

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