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# Reversing Rapids Co. purchases an asset for \$152,117. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense...

Reversing Rapids Co. purchases an asset for \$152,117. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of year 4 for \$10,264.

Calculate After-Tax Cash Flow at disposal. Round the answer to two decimals.

The book value = \$152 117 * ( 1-(0.20+ 0.32+0.1920+ 0.1152)) =152 117* 0.1728 =\$28 285.82 Loss... View the full answer

• Sorry for the cascading computation mistakes: The book value = \$152 117 * ( 1-(0.20+ 0.32+0.1920+ 0.1152)) =152 117* 0.1728 =\$26 285.82
• Wellstuts
• Oct 07, 2017 at 7:43pm
• Loss on disposal = MV - BV = \$10 264- 26 285.82 =-16 021.82
• Wellstuts
• Oct 07, 2017 at 7:43pm
• The tax credit on disposal = 16 021.82 * 30% =\$4 806.55
• Wellstuts
• Oct 07, 2017 at 7:44pm
• After-Tax Cash Flow at disposal. = Disposal value + Tax credit on disposal =10 264 + 4 806.55 =\$15 070.55
• Wellstuts
• Oct 07, 2017 at 7:45pm

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