Cashflow: Year one car

Suppose you have a firm that faces a 50% combined tax rate and that you purchase an $18,000 car, a five-year asset, in year zero. What is your change in net cash flow in year one?

Depreciation = $18,000 x MACRS .32 = $5,760
Tax Savings = Depreciation $5,760 x Tax Rate .5 = $2,880
After Tax Cash Flow = $2,880

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