Final answer:
The aftertax cash flow from the sale of the asset is $166,930.00, which is the sale price of $157,000 plus the tax benefit of $9,930.00 from the loss on the sale.
Step-by-step explanation:
To calculate the aftertax cash flow from the sale of this asset, we will need to first determine the amount of accumulated depreciation on the asset at the end of the project and the associated tax implications of the sale. Since the asset cost is $715,000 and it is depreciated over a seven-year tax life, we find the annual depreciation by dividing the initial cost by the number of years:
$715,000 / 7 years = $102,142.86 per year
Because the project lasts for five years, the accumulated depreciation at the time of sale is:
$102,142.86 per year * 5 years = $510,714.30
The book value of the asset at the end of the project is the initial cost minus the accumulated depreciation:
$715,000 - $510,714.30 = $204,285.70
When the asset is sold for $157,000, the loss on the sale is:
$204,285.70 - $157,000 = $47,285.70
This loss reduces taxable income, resulting in a tax benefit calculated as follows:
$47,285.70 * 21% = $9,930.00
Therefore, the aftertax cash flow from the sale of the asset is the sale price plus the tax benefit from the loss:
$157,000 + $9,930.00 = $166,930.00