View the step-by-step solution to:

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.

Top Answer

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

4 comments
  • 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

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online