(Solution) 11.6 Computing Terminal-year FCF: Healthy Potions, Inc., A Pharmaceutical Company, Bou A Machine At A Cost Of $2,000,000 Five Years Ago That Produces... | Snapessays.com


(Solution) 11.6 Computing terminal-year FCF: Healthy Potions, Inc., a pharmaceutical company, bou a machine at a cost of $2,000,000 five years ago that produces...


Complete tabs 11.9, 11.16, 11.22, 11.24, 11.25, and 11.32. Complete with formulas thank you 11.6

 

The relevant cash flows would be as follows:

 

A)

 

Salvage value of machine =

 

$

 

1,000,000

 

Book Value of machine =

 

$

 

800,000

 

Marginal tax rate =

 

30%

 

Taxable Gain from sale =

 

$

 

200,000

 

Taxes on gain=

 

$

 

60,000

 

After tax Salvage value=

 

$

 

940,000

 

=cash inflow in term

 

B)

 

If the machine is sold for $600,000

 

Salvage value of machine =

 

$

 

600,000

 

Book Value of machine =

 

$

 

800,000

 

Loss on sale

 

$

 

(200,000)

 

Tax saving from write-off on loss=

 

$

 

60,000

 

After tax Salvage value=

 

$

 

660,000

 

=cash inflow in term

 

Computing terminal-year FCF:

 

Healthy Potions, Inc., a pharmaceutic

 

a machine at a cost of $2,000,000 five years ago that produces pain-re

 

machine has been depreciated over the past five years, and the curren

 

$800,000. The company decides to sell the machine now at its market

 

The marginal tax rate is 30 percent. What are the relevant cash flows?

 

if the market price of the machine is $600,000 instead?

 


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This question was answered on: May 23, 2022

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