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1 . The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $

1. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $30,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $5,000. The computer would increase the firm's before-tax revenues by $30,000 per year but would also increase operating costs by $15,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent.
What is the net cash flow at t =0? Cash outflow should be in negative number, e.g.,-33,000, and do not include the $ sign.
2. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $60,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $29,000 per year but would also increase operating costs by $20,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent.
What is the operating cash flow in Year 2? Round it to a whole dollar, and do not include the $ sign.
Year MACRS
Percent
10.33
20.45
30.15
40.07

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