A new delivery truck can be purchased for $30,000. The old one could be sold today for
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A new delivery truck can be purchased for $30,000. The old one could be sold today for $5,000, and has a book value of $3,000. In three years, the old truck will have a salvage value of $1,000 (and no book value). The new truck would be depreciated on a 5-year MACRS schedule. The firms tax rate is 21%.
If the old truck is sold and the new one bought, what is the operating cash flow for year 2?
Use
Table 13.1 MACRS Depreciation Schedule
| Year | Class | |||
| 3 years | 5 years | 7 years | 10 years | |
| 1 | 41.67% | 25.00% | 17.85% | 12.50% |
| 2 | 38.89% | 30.00% | 23.47% | 17.50% |
| 3 | 14.14% | 18.00% | 16.76% | 14.00% |
| 4 | 5.30% | 11.37% | 11.97% | 11.20% |
| 5 | 11.37% | 8.87% | 8.96% | |
| 6 | 4.26% | 8.87% | 7.17% | |
| 7 | 8.87% | 6.55% | ||
| 8 | 3.34% | 6.55% | ||
| 9 | 6.56% | |||
| 10 | 6.55% | |||
| 11 | 2.46% | |||
| Total | 100.00% | 100.00% | 100.00% | 100.00% |
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