Salaries represent the costs of employing two new machine operators at a salary of $40,000 per annum each. For the HCC machine, the company will only need to employ a new machine operator and the second, who earns $70,000 per annum, will be transferred from the axle assembly plant. The second operator from the main plant would otherwise have been made redundant with a redundancy payment of $50,000. Company is subject to 30% corporate tax.

Should I include the "avoided" redundancy payment in incremental cash flow ? cash inflow or outflow? Should i remove the 30% tax rate from $50000 redundancy payment?

Answer rating: 100% (QA)

Including the avoided redundancy payment in incremental cash flow depends on the perspective youre t... View the full answer