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evaluating purchase of a new machine The machine is expected to result in additional pre-tax operating revenue of $150,000 per year and additional operating expenses
evaluating purchase of a new machine The machine is expected to result in additional pre-tax operating revenue of $150,000 per year and additional operating expenses of $100,000 per year. The depreciable base of the machine would be $230,000 and machine would be depreciated using MACRS 3-year class method. The machine can be sold for $60,000 after 4 years of useful life. The applicable tax rate is 40 percent.
year 1 2 3 4
depreciation(%) 34 46 14 6
Estimate the after-tax operating cash flows for machine for the terminal year (Year 4)
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