Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $41.50 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.30 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment?

Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $41.50 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.30 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...

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