Question

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

Answer 1

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

Step-by-step 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