1. If the Johnson Company of Problem 1 is subject to a marginal tax rate of 34%, what is the cash flow associated with the sale of the used truck?
2. Heald and Swenson Inc. purchased a drill press for $850,000 one year and nine months ago. The asset has a six-year life and has been depreciated according to the following accelerated schedule.
|
Year
|
Percent of Cost
|
|
1
|
55%
|
|
2
|
20%
|
|
3
|
10%
|
|
4
|
5%
|
|
5
|
5%
|
|
6
|
5%
|
The press was just sold for $475,000. The firm's marginal tax rate is 35%. Calculate Heald and Swenson's taxable profit and cash flow on the sale. Assume depreciation is spread evenly within each year.