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The purchase of new injection molding equipment (MACRS.GDS 3 year property) costs $125,000 and has a planned salvage value of $13,000 after a useful life
The purchase of new injection molding equipment (MACRS.GDS 3 year property) costs $125,000 and has a planned salvage value of $13,000 after a useful life of 4 years. The tool generates net revenue (CFBT) of $43,000 per year. The total effective corporate tax rate is 21 percent. After three years, plans changed and the company sold the machine at the end of the year for $30,000. A partial view of the analysis is shown below. What is E, the CFAT (Cash Flow After Taxes) for year 3? Year CFBT Depr. TI Tax CFAT 0 $ (125,000) $ (125,000) 1 43,000 $ 41,663 $ 1,338 $ 281 $ 42,719 2 S 43,000 $ 55,563 $ (12,563) $ (2,638) D 3 S 43,000 A B C E Where CFBT = Cash Flow Before Tax; Depr = Depreciation; TI = Taxable Income; Tax = Tax; CFAT = Cash Flow After Tax; PWofCFAT = Present Worth of Cash Flow After Tax. Your
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