Question
Use the following to answer the next three questions: The Wall, Co. is considering the purchase of some new machinery. The new machinery costs $60,000.
Use the following to answer the next three questions: The Wall, Co. is considering the purchase of some new machinery. The new machinery costs $60,000. The machinery falls into the MACRS three-year class, and it will be sold after three years for $8,000. The depreciation percentages each year are: Year 1 = 33%, Year 2 = 45%, Year 3 = 15%, Year 4 = 7%. The machinery will require The Wall to increase its working capital by $4,600 which will be recovered at the end of the machinery's life. The machinery has a three year life and will increase The Wall's revenues by $150,000 and costs by $25,000 for each year of the project's three year life. The Wall has a 10% cost of capital and has a 20% tax rate. What is the operating cash flow in year 2 for the project? Multiple Choice $60,000 $100,000 $105,400 $103,960
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