In year 0 you purchase an asset for $500,000 and in year 1 you receive a positive cash flow of $100,000from operating the asset. Following a MACRS 7-year depreciation schedule (year 1 recovery rate of 14.29percent) and assuming you are in a 39% tax bracket, what is your year 1 after tax cash flow (ATCF) to thenearest $50 ?O a)$88,750O b) $28,550c)$400,000O d)$380,750O e)$11,250

Depreciation = Cost of the asset * Rate of recovery Cost of the asset $500,000 Rate of recovery…

Answered: after tax cash flow

Business

Accounting

after tax cash flow

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

In year 0 you purchase an asset for $500,000 and in year 1 you receive a positive cash flow of $100,000
from operating the asset. Following a MACRS 7-year depreciation schedule (year 1 recovery rate of 14.29
percent) and assuming you are in a 39% tax bracket, what is your year 1 after tax cash flow (ATCF) to the
nearest $50 ?
O a)
$88,750
O b) $28,550
c)
$400,000
O d)
$380,750
O e)
$11,250

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