1a,1b, 2

1. Manufacturers, Inc. is planning to buy a new piece of equipment to add to its production line. The firm has determined that the new production line will result in additional net income of $15,000 each month. It has also calculated that its net cash flow will increase by $12,000 each month. (5 points each) a. When making the decision to invest in the new production line, which amount is more meaningful? Why? b. Why is it important to consider only the NET income or cash flow? 2. Manufacturers, Inc.'s average tax rate is 33% and its marginal tax rate is 29%. The firm is planning to buy a new piece of equipment to add to its production line. Which tax rate should it use in analyzing the impact of the decision on the firm's cash flows from the project? Why? (5 points) (Ctrl)