Suppose a project requires purchasing equipment worth $20 M. At the end of year 2 the equipment is sold for $7 M. Calculate after-tax cash flow associated with the sale of the equipment if corporate tax rate is 40%.

Assume the equipment needed for the project is depreciated according to MACRS 5-year depreciation schedule:

5-year MACRS:

Year 0: 20%

Year 1: 32.0%

Year 2: 19.2%

Year 3: 11.52%

Year 4: 11.52%

Year 5: 5.76%