Hartsfield Company is considering purchasing a set of machine tools at a cost of $40,000. The purchase is expected to generate increased sales of $30,000 per year but also increased operating costs of $12,000 per year in each of the next three years. Additional profits will be taxed at a rate of 40%. The asset falls into CCA Class 43 (rate = 30%) for tax purposes and the 50% rule applies. The project has a three-year life with $5,000 salvage value. Assume the firm also requires working capital of $4000 (n=0; maintained in purchasing power) which will be recovered at the projects completion and that the machine tools will be purchased 50% on debt. The debt will be paid off in equal annual payments over the life of the project. The interest rate on the debt was negotiated at 12% annually.

The general inflation rate is 10% per year (and affects everything that it normally affects).

Assume a MARR = 7% .

(Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar.)

15. The disposal tax effect in actual dollars is ; ?