Question
Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a new childrens toy. The machine will
Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a new childrens toy. The machine will increase EBITDA by $209,769 per year for the next two years. The machines purchase price is $260,000 and the salvage value at the end of two years is $46,800. The machine is in Class 43 with a depreciation rate of 30%. The depreciation expense in Year 1 is $39,000. The tax rate is 35%. What are the operating cash flows for the project in Year 1? (Include the depreciation tax shield.) Responses
$140,000
$150,000
$145,000
$135,000
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