7) MACRS Depreciation Rate Year0 Year 1 Year 2 Year3 Year 4 Year 5 Year 6 Year 7 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% A textile company invests $12 million in an open-end spinning machine. This was depreciated using the seven-year MACRS schedule shown above. If the company sold it immediately after the end of year 3 for $7 million, what would be the after-tax cash flow from the sale of this asset, given a tax rate of 40%? A) S1,300,480 B) $1,950,720 C) $2,076,880 D) S5,699,520 Answer: D Explanation: D) Book Value- 12- 8.2512 -3.7488; capital gain-7-3.7488-3.2512; tax owed-0.4 x 3.2512 1.30048; after-tax cash flow -7,000,000 1,300,480 $5,699,520