Keira Knightley Company buys a piece of equipment for $36,442 that will last for 7 years....
Keira Knightley Company buys a piece of equipment for $36,442
that will last for 7 years. The equipment will generate cash flows
of $7,000 per year and will have no salvage value at the end of its
life. Ignore taxes unless told to include them.
Using straight-line depreciation over the life of the asset, what
is the after tax cash flow in year 3? Assume a 30% tax rate and
that the original cash flow was before tax.
Homework Answers
Calculate after tax flow in Year 3
| Cash flow | 7000 |
| Depreciation expense (36442/7) | -5206 |
| Income before tax | 1794 |
| Tax (1794*30%) | 538.20 |
| Net income | 1255.80 |
| Depreciation | 5206 |
| After tax cash flow in year 3 | 6461.80 or 6462 |
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Keira Knightley Company buys a piece of equipment for $36,442
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