Healthy Potions, Inc., a pharmaceutical company, bought a machine at a cost of $2 million five years ago that produces pain-reliever medicine. The machine has been depreciated over the past five years, and the current book value is $930,000. The company decides to sell the machine now at its market price of $1 million. The marginal tax rate is 31 percent.
- What are the relevant cash flows?
- How do they change if the market price of the machine is $600,000 instead?