Yin estimates the market value of a machine will be 14000 at

Yin estimates the market value of a machine will be $14,000 at the end of year five. At that time, the book value of the machine will be $4,000. The machine originally cost $42,000 and an increase of $4,000 in NWC was invested at the start of the project. If the machine is sold in year five and the tax rate is 40 percent, what is the after tax terminal cash flow? Also, please show how to entering numbers in financial calculator HP bII+

Solution

Gain = sale value - Book value

          = 14000 - 4000.

           = 10000

Tax on gain = 10000* .40 = 4000

After tax sale value = 14000-4000 = 10000

After tax terminal cash flow =After tax sale value + NWC released

                   = 10000 + 4000

                    = $ 14000