The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $299,000. a. What is the book value of the equipment? b. If Jones sells the equipment today for $181,000 and its tax rate is 21%, what is the after-tax cash flow from selling it? Note: Assume that the equipment is put into use in year 1. CO a. What is the book value of the equipment? The book value of the equipment after the third year is $ (Round to the nearest dollar.)

The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $299,000. a. What is the book value of the equipment? b. If Jones sells the equipment today for $181,000 and its tax rate is 21%, what is the after-tax cash flow from selling it? Note: Assume that the equipment is put into use in year 1. CO a. What is the book value of the equipment? The book value of the equipment after the third year is $ (Round to the nearest dollar.)

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 1PROB

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece of equipment it originally purchased for $299,000.

a. What is the book value of the equipment?
b. If Jones sells the equipment today for $181,000 and its tax rate is 21%, what is the after-tax cash flow from selling it?

**Note:** Assume that the equipment is put into use in year 1.

---

**a. What is the book value of the equipment?**

The book value of the equipment after the third year is $_____. (Round to the nearest dollar.)

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