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The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new machine. The machine's price is $30,000, 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 $30,000, and it falls into the MACRS 3-year class. Purchase of the machine would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $26,000 per year but would also increase operating costs by $13,000 per year. The machine is expected to be used for 3 years and then be sold for $12,000. 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 0.33 0.45 0.15 0.07 2 3
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