Question
I need complete workings to be shown. Also, show the working of depreciation. CellU, a subsidiary of CompU, is looking to replace one of the
I need complete workings to be shown. Also, show the working of depreciation.
CellU, a subsidiary of CompU, is looking to replace one of the machines they use to manufacture cell phones with a new, more efficient model. The installed cost of the new machine less what they can sell the old machine for is $12,190. The current machine cost $7,500, is three years old, and is depreciated using the MACRS 3-year recovery period (33%, 45%, 15%, 7%). The expected life of the new machine is 3 years, is depreciated using the MACRS 3-year recovery period, and will reduce annual labor expenses from $10,000 to $4,000. The firm has a marginal tax rate of 40 percent.
a. Calculate the annual incremental operating cash flows for the new machine
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started