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3 January, 00:54

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

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  1. 3 January, 01:26
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    The incremental cash flow from selling the machine is $738,657

    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
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