Question
ABC welding machine has 6 years of remaining life. If kept, the machine will have depreciation expenses of $700 each year. If the current book
ABC welding machine has 6 years of remaining life. If kept, the machine will have depreciation expenses of $700 each year. If the current book value is $4,200, and it can be sold for $3,500 at this time. If the old machine is not replaced, it can be sold for $800 at the end of its useful life. ABC is considering purchasing a new machine, which costs $13,200 and has an estimated useful life of 6 years with an estimated salvage value of $2500. This machine falls into the MACRS 5-year class, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The new machine would raise sales by $2,000 per year; the new machine would increase operating expenses by $500 per year. To support the greater sales, the new machine would require $2,100 additional investment NWC. ABC's tax rate is 25% and its WACC is 10%. What is the amount of non-operating cash flow in year 6 (initial cash flow)? $1,650.00 -$1,500.00 -$450.00 $150.00 $850.00
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