After$-$Tax Cash Flows: Final Disposal

At the end of the life of the project, there are two major sources of cash: $(1)$ release of working capital and $(2)$ preparation, removal, and sale of the equipment $($salvage value effects$).$ Any working capital committed to a project is released at this point. The release of working capital is a cash inflow with no tax consequences. Disposing of an asset associated with a project also has cash consequences. At times, an asset may have a market value at the end of its life. The selling price less the cost of removal and cleanup produces a gross cash inflow. See Step $3$ for how to calculate the tax effects associated with the disposal of an asset.

Apply the Concepts

A company invested $$180,000$ of working capital at the beginning of a project. At the end of the project, an asset has a selling price of $$120,000.$ Its removal and cleanup costs total $$30,000.$ The book value of the asset is $$15,000.$ The tax rate is $40$ percent.

Required:

Calculate the after$-$tax expected cash flow at the end of the project's life: $

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