Question
Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost $190,000, and it will cost $33,000 to modify it
Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost $190,000, and it will cost $33,000 to modify it for special use by the firm. The machine falls into the MACRS 3 yr class, and it will be sold after 3 years of use for $110,000. The machine will require an increase in net working capital at $9000 and will have no effect on revenues, but is expected to save the firm $90,000 per year in before-tax operating costs, mainly labor. The company's marginal tax rate is 40%. What is the cash flow from the project for year 1? MACRS Depreciation Rates Year 3 yr 5yr 1 33.33% 20.00% 2 44.45% 32.00% 90,000, 79,331, 83730, 9404, 71840
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