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What are the after-tax cash flow effects of selling old unit

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Question - Five years ago, the Dream Team acquired a processing machine. The machine cost $45,000 and is being depreciated using the straight-line method over a 10-year period to an estimated salvage value of $0. A new, improved unit is now available, and the firm is considering making a switch. The firm's marginal tax rate is 40 percent.

Required - What are the after-tax cash flow effects of selling the old unit if it can be sold for $15000?

Tax savings on tax loss: $4000

No tax consequences

Tax savings on tax loss: $3000

Tax on depreciation recapture: $3000

Reference no: EM132784209

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