Question
New machine: - purchase price $ 400,000 - expected to generate net sales of $250,000 each year for the next 8 years - operating costs
New machine: - purchase price $ 400,000 - expected to generate net sales of $250,000 each year for the next 8 years - operating costs are expected to be $100,000 a year for the next 8 years - depreciation is on a straight-line basis, there is no salvage value - the tax rate is 20% - this project qualifies for an immediate 10% investment tax credit The net after tax cash outflow in year 0.
The net cash flow after tax associated with this project in the first year is:
If you were now told that this project will be partly financed with a loan for $300,000, interest payments will be $18,000 each year. How would this information alter your calculation of net cash flows from operations?
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