You are evaluating the acquisition of a new ski machine. Its price is $200,000, and it costs $40,000 to install. It falls into the MACRS 3-year class. The machine will save the firm's operating costs by $125,000 per year and require a $10,000 increase in inventory when it is installed. It will be used for 4 years and then sold for $25,000. Your firm's tax rate is 40%, and the project's cost of capital is 10% (MACRS depreciation schedule for a 3-year class asset is: 33%, 45%, 15%, and 7%).

What is the initial net investment outlay in Year 0?

$240,000

$210,000

$250,000

$200,000

$230,000

You are evaluating the acquisition of a new ski machine. Its price is $200,000, and it costs $40,000 to install. It falls into the MACRS 3-year class. The machine will save the firm's operating costs by $125,000 per year and require a $10,000 increase in inventory when it is installed. It will be used for 4 years and then sold for $25,000. Your firm's tax rate is 40%, and the project's cost of capital is 10% (MACRS depreciation schedule for a 3-year class asset is: 33%, 45%, 15%, and 7%).

What is the after-tax cash flow (both operating and non-operating) in Year 4?

$106,720

$116,720

$141,720

$91,720

$81,720