In HomeNet's example, the $7.5 million capital expenditure is depreciated to 0 in five years. At the end of the five year, if the company expect to find a buyer for the used equipment for $0.5 million. How much cash flow would be recorded in Year 5 due to this sale of used equipment if its tax rate is 20%?

Please explain in detail

Year o Year 1 Year 2 Year 3 Year 4 Year 5 $50,000 $260 ($120) 20% $100 ($60) $100,000 $234 ($96) 20% $90 ($48) $150,000 $211 ($77) 20% $81 ($38) $200,000 $190 ($61) 20% $73 ($31) Key Assumptions Revenue and Costs Homenet Units Sold HomeNet Ave. Price/Unit HomeNet Cost/Unit Cannibalization Rate Old product Ave. Price/Unit Old Product Cost/Unit Operating Expenses Marketing & Support Lost Rent Hardware R&D (expensed) Software R&D (expensed) Lab Equipment (capitalized) Other Assumptions Depreciation schedule Corporate tax rate Receivables (% of sales) Payables (% of COGS) Cost of Capital ($2,800,000) ($2,912,000) ($200,000) ($ 208,000) ($3,028,480) ($216,320) ($3,149,619) ($ 224,973) ($5,000,000) ($10,000,000) ($7,500,000) $500,000 0% 0% 0% 0% 0% 100% 20% 20% 20% 15% 20% 15% 20% 15% 15% 15% 20% 15% 15% 15% 15% 15% 12%