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Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The machine falls into the MACRS 3-yr
Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. The machine falls into the MACRS 3-yr class, (33%, 45%, 15%, and 7%) and it would be sold at the end of its 2-year operating life for $1,800. The machine would require an increase in net working capital by $2,000 when the machine is installed, but required working capital will return to the original level when the machine is sold after 2 years. Mars's marginal tax rate is 40 percent, and it uses a 12 percent cost of capital to evaluate projects of this nature. If the machine costs $6,000 and the installation cost is $1,000, what is the operating cash flow in year 1 (OCF)? If the answer is $1,234, enter 1234 without dollar sign and comma (no decimals)
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