• Carving Champs Corp (CCC) just purchased a life-sized Pumpking for an expansion project. CCC paid $920,000 for the Pumpking, which will be straight-line depreciated to $100,000 over the next 10 years. If CCC sells the Pumpking for $200,000 in 6 years and the tax rate is 22%, what is the after-tax cash flow associated with this sale? (Assume CCC overall has sufficient profits to take advantage of any capital loss tax benefits).
  • What if it is depreciated to zero using the 7-year MACRS rates instead? (MACRS table is below)
• Three years ago, Stock Tek purchased some five-year MACRS property for $82,600. Today, it is selling this property for $31,500. How much tax will the company owe on this sale if the tax rate is 34 percent? The property is in the 5 years MACRS class, so the depreciation percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. What is the after-tax cash flow from this year 3 sale?