Final answer:
To calculate the net cash flow for a discounted cash flow analysis, subtract the income tax from the cash received from the sale. Use the formula: Net cash flow = Cash received from sale - Income tax.
Step-by-step explanation:
To calculate the net cash flow to use in a discounted cash flow analysis, we need to subtract the income tax from the cash received from the sale. The cash received from the sale is $18,000 and the book value of the machine is $13,000.
First, we calculate the gain on the sale of the machine:
Gain on sale = Sale price - Book value
Gain on sale = $18,000 - $13,000
Gain on sale = $5,000
Next, we multiply the gain on sale by the income tax rate to calculate the income tax:
Income tax = Gain on sale x Income tax rate
Income tax = $5,000 x 30%
Income tax = $1,500
Finally, we subtract the income tax from the cash received from the sale:
Net cash flow = Cash received from sale - Income tax
Net cash flow = $18,000 - $1,500
Net cash flow = $16,500