Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $44.50 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18.90 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? Note: Enter your answer in millions rounded to 1 decimal place. After-tax cash flow $ 18.6 & |million | Explanation Some values below may show as rounded for display purposes, though unrounded numbers should be used for actual calculations. After-tax cash flow from sale = Sale price — [Tax rate x (Market value — Book value)] =$18.90 million - (0.30 x {$18.90 million - [($44.50 million = 5) x 2])) = $18.57 million
