Question
Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is 1.84million plus
Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is 1.84million plus $104000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table LOADING...). Additional sales revenue from the renewal should amount to $1.11 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 39% of the additional sales. The firm is subject to a tax 21% rate of . (Note: Answer the following questions for each of the next 6 years.)\ a. What net incremental earnings before depreciation, interest, and taxes will result from the renewal?\ b. What net incremental operating profits after taxes will result from the renewal?\ c. What net incremental operating cash inflows will result from the renewal?
Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is 1.84million plus $104000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table LOADING...). Additional sales revenue from the renewal should amount to $1.11 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 39% of the additional sales. The firm is subject to a tax 21% rate of . (Note: Answer the following questions for each of the next 6 years.)\ a. What net incremental earnings before depreciation, interest, and taxes will result from the renewal?\ b. What net incremental operating profits after taxes will result from the renewal?\ c. What net incremental operating cash inflows will result from the renewal?
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