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A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For...

A fleet of delivery vans will cost $160,000. Depreciation is straight line over five years. For capital budgeting purposes, however, you will use cash flow from salvage at the end of four years and assuming you can obtain a sales price of one half of the initial cost. What will that Year 4 savage cash flow be if the company's tax rate is 27.0%?

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about $12,960

$80,000

$67,040

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Answer #1
Particulars Amount Formula
Cost $ 1,60,000.00 Given
Life 5 Years Given
Dep per Anum $    32,000.00 [ Cost - Salvege Value ] / Useful Life
Accumulated dep for 4 Years $ 1,28,000.00 Dep Per Anum * 4
Book Value After 4 Years $    32,000.00 Cost - Accumulated Dep
Sale Price $    80,000.00 Given
Profit $    48,000.00 Sale Price - Book Value
Tax on Profit $    12,960.00 Profit * Tax Rate
Cash flow $    67,040.00 Sale Price - Tax

OPtion C is correct

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