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Berti Plastics Inc. is considering the purchase of a new plastic molding machine, which will have a greater capacity than the existing machine, to produce

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Berti Plastics Inc. is considering the purchase of a new plastic molding machine, which will have a greater capacity than the existing machine, to produce molded plastic components. The new machine costs $244,739 and shipping/installation is expected to total $11,664. The new machine is expected to produce 80,000 more plastic components per year than the existing machine. The expected sales price of the plastic components is $1.47. Variable operating expenses are expected to be $0.55 per item and fixed operating costs are expected to be $30,758 per year. The existing machine that is being replaced has been completely depreciated and has a current scrap value of $30,000 (i.e., the existing machine will be sold at time to make way for the new machine). Berti will use straight line depreciation over the machine's 5-year expected life. Berti expects to sell the new machine at the end of the fifth year for $60,000. The new machine will require an initial increase in net working capital of $20,000 that will be recovered at the end of the project. Berti's marginal tax rate is 30%, and the firm uses a 12% cost of capital (discount rate) to evaluate projects of this type. What will the operating cash flow for this project be during year 4? DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ENTER YOUR ANSWER TO THE NEAREST DOLLAR (e.g. 1250) MACRS Rates: Year 1: 33.33% Year 2: 44.45% Year 3: 14.81% Year 4: 7.41%

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