Question
ABC Company is evaluating the acquisition of a new ski machine. Its price is $218,734, and it costs $5,412 to install. The new machine falls
ABC Company is evaluating the acquisition of a new ski machine. Its price is $218,734, and it costs $5,412 to install. The new machine falls into the MACRS 3-year class with the depreciation schedule of 33%, 45%, 15%, and 7% and requires a $12,000 increase in inventory when it is installed. The new machine will save the firm's operating costs by $127,962 per year, will be used for 4 years and then sold for $25,000 at the end of 4 years. The company's tax rate is 40%, and the project's cost of capital is 10%. What is the after-tax cash flow (both operating and non-operating) in Year 4 for this project? Do not discount cash flows back to Year 0. Round your answer to the nearest dollar, but do not include $ sign in your answer, e.g., xxx,xxx. (Hint: Identify relevant cash flows items including the after-tax net salvage value in Year 4, which is the end of the project life, and then dollar amount.)
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