Question
Question 2 ABC Machine Shop is considering a 5-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to
Question 2
ABC Machine Shop is considering a 5-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to result in $90,000 in annual pretax cost savings, $100,000 in sales, increase $25,000 in inventory, increase 40,000 in account receivables, and increase $15,000 in notes payable. The press falls in the MACRS 5-year class (0.20, 0.32, 0.192. 0.1152, 0.1152, 0.0576) and it will have a salvage value at the end of the project of $85,000. The shop's tax rate is 35 percent and its discount rate is 11 percent. What is the terminal cash flow in year 5?
$253,323.8 | ||
$363,123.3 | ||
$193,350.4 | ||
$163,400.5 | ||
$263,223.8 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started