Question
The Carowinds Metals Corporation is trying to bccome more profitable (and maybe improve quality) by adding more efficient welding equipment. Despite the cost, they feel
The Carowinds Metals Corporation is trying to bccome more profitable (and maybe improve quality) by adding more efficient welding equipment. Despite the cost, they feel profit can be made if using MACRS depreciation. The current welding machine is 15 years old, fully depreciated, obsolete, and has no salvage value. However, it is still perfectly functional. A new welder will cost $184,819 and have an estimated life of 8 years with no salvage value. The new welders improved efficiency will increase earnings before depreciation from $33,899 to $74,968 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 0.32 (decimal form of %, so multiply by 100 if you want %). What is the total cash flow generated by adding the replacement welder over its 8-year life? (Ignore any time value of money effects). Round your answer to the nearest whole number (no decimals).
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