Question
Company X is evaluating a proposal for a new machine for use in operations. They intend to sell the machine at the end of four
Company X is evaluating a proposal for a new machine for use in operations. They intend to sell the machine at the end of four years. The machine has a cost of $100,000, will have accumulated depreciation of $83,000 after four years, and will be sold for $25,000. If this machine had not been purchased, the old machine used before would have a book value of $0 and be sold at the same time for $2,000. As a result of this sale, working capital would decrease by $5,000. The applicable tax rate is 40%. Calculate the terminal cash flow from this proposal.
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