Question
The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $220,000 installed, will generate additional revenues of
The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $220,000 installed, will generate additional revenues of $85,000 per year, and will save $65,000 per year in labor and material costs. The machine will be financed by a $120,000 bank loan repayable in three equal annual principal installments, plus 9% interest on the outstanding balance. The machine will be depreciated using seven-year MACRS. The useful life of the machine is 10 years, after which it will be sold for $20,000. The combined marginal tax rate is 25%.Find the year-by-year after-tax cash flow for the project.
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