Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $ 7 0,000,

The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $ 7 0,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $ 25 ,000 per year but would also increase operating costs by $ 13 ,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. What is the operating cash flow in Year 2? Round it to a whole dollar, and do not include the $ sign.

Year

MACRS Percent

1

0.33

2

0.45

3

0.15

4

0.07

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

Pricing And Liquidity Of Complex And Structured Derivatives

Authors: Mathias Schmidt

1st Edition

3319459694, 978-3319459691

More Books

Students also viewed these Finance questions

Question

How many moles of water are there in 1.000 L? How many molecules?

Answered: 1 week ago

Question

What attracts you about this role?

Answered: 1 week ago

Question

How many states in India?

Answered: 1 week ago

Question

HOW IS MARKETING CHANGING WITH ARTIFITIAL INTELIGENCE

Answered: 1 week ago