Question: Reddy Laboratories had purchased some manufacturing equipment five years ago
Reddy Laboratories had purchased some manufacturing equipment five years ago for a total cost of $3,000,000, and has been depreciating it using the MACRS – 7 year class-life rates. Currently, newer, more efficient equipment is available and Reddy has found a buyer who is willing to pay $$500,000 for the old equipment. If the firm, which has a marginal tax rate of 35%, disposes of the system to the buyer, how much will the after-tax cash flows add up to?
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