Question
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new machine. The machine's price is $50,000, and it
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new machine. The machine's price is $50,000, and it falls into the MACRS 3-year class. Purchase of the machine would require an increase in net operating working capital of $4,000. The machine would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $11,000 per year. The computer is expected to be used for 3 years and then be sold for $24,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. What is the total value of the terminal year non-operating cash flows at the end of Year 3? Round it to a whole dollar, and do not include the $ sign.
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