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

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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.

Problem 1: 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: EM132775764

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