Two years ago your firm bought a new machine for 4000 The ma

Two years ago, your firm bought a new machine for $4,000. The machine was depreciated on a MACRS 3 year schedule. Today, your company will sell the machine for $5,000. The tax rate is 24%. What are the after tax proceeds from the sale? Answer to 2 decimals, for example 105.21.

MACRS 3 Year

Year Amount

1 33.33%

2 44.45%

3 14.81%

4 7.41%

Solution

Value as on date of sale=Cost-Accumulated Depreciation

=$4000(1-0.3333-0.4445)

=$888.80

Hence gain on sale=(5000-888.80)=$4111.2

Hence after tax proceeds=Sale proceeds-(gain on sale*Tax rate)

=5000-(4111.2*0.24)

which is equal to

=$4013.31(Approx).