Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase pre-tax income (EBITDA) by $15,000 each year

Tank Ltd is considering undertaking the purchase of a new piece of equipment that is expected to increase pre-tax income (EBITDA) by $15,000 each year for the next 4 years. It costs $35,000 to purchase today and for tax purposes must be depreciated down to zero over its 5 year useful life using the straight-line method. If Tank is actually forecasting a salvage (for capital budgeting purposes) of $9,000 after 4 years, what is the machine's net cash flow (after tax) for year 4? Assume the tax rate is 30%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Finance and Public Policy

Authors: Jonathan Gruber

5th edition

1464143331, 978-1464143335

More Books

Students also viewed these Finance questions

Question

Why is intrinsic motivation healthier than extrinsic motivation?

Answered: 1 week ago