Question
Joe Businessperson is considering the purchase of a machine for $650,000. The machine would be depreciated to a $50,000 salvage value over a nine-year period
Joe Businessperson is considering the purchase of a machine for $650,000. The machine would be depreciated to a $50,000 salvage value over a nine-year period using the straight-line method and would bring in incremental cash income of $80,000 in each year. However, the firm expects to sell the machine for $60,000 at the end of the nine years. The firm's federal tax rate on income is 35%. Calculate the incremental cash flows from:
a. The purchase of the machine
b. The depreciation of the machine
c. The operation of the machine
d. The sale of the machine
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