Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are evaluating a proposed acquisition of a new machine costing $ 5 0 , 0 0 0 . While the machine is expected to

You are evaluating a proposed acquisition of a new machine costing $50,000. While the machine is expected to last for 5 years, it falls into the MACRS 3-year class.
Purchase of the machine would require an increase of net operating working capital of $2,000. The machine would increase the firm's revenue by $14,000 per year and its operating costs by $7,000 per year. The firm's marginal tax rate is 29 percent, and the project's cost of capital is 14 percent. What is the operating cash flow in Year 3?
MACRS 3-year schedule is as follows: 33%,45%,15%, and 7% for years 1 to 4, respectively.

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

Financial Management Principles And Applications

Authors: Dr. S. Kr. Paul, Prof. Chandrani Paul

1st Edition

1647251664, 9781647251666

More Books

Students also viewed these Finance questions