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David Davis is reviewing a capital budgeting proposal from TA, Inc. TA is considering investing in a new machine. The details of the proposal are
David Davis is reviewing a capital budgeting proposal from TA, Inc. TA is considering investing in a new machine. The details of the proposal are as follows: The machine costs $460,000 and installation costs $4o,000. using the straight-line method to zero over a five-year life. During the life of the machine, an inventory investment of $80,000 is required. * The machine is expected to generate additional revenues of $350,ooo per year. The machine is expected to reduce TA's cash operating expenses by $20,00o per year. .After five years, the machine will be sold for $90,00o. TA is in the 35% tax bracket and its cost of capital is 12%. TA's terminal year after-tax non-operating cash flow at the end of year five closest to: A$138,500 B$170,000 C$414,000
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