Homework Answers
Calculation of Depreciation for 3 year under MACRS for 5 year Equipment(Half year convention)
First year Dep = 3500*20%=700
Second year Dep= 3500*32%=1120
Third year Dep =3500*19.20%=672
Total Depreciation= 2492
Book Value at third year end= 3500-2492=1008
Sales Price=4000
Gain on Sale of asset=4000-1008=2992
Depreciation Recapture Tax= 2492*35%=872.20
Capital Gain tax=(2992-2492)*20%=100
Total Tax amount=872.20+100=972.20
Hence, After Tax cash Flow = 4000-972.20=3027.80 ANSWER
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