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 $$14,000$ per year and its operating costs by $$6,000$ per year. The firm's marginal tax rate is $31$ percent, and the project's cost of capital is $14$ percent. What is the operating cash flow in Year $4?$ MACRS $3-$year schedule is as follows: $33\%,45\%,15\%,$ and $7\%$ for years $1$ to $4,$ respectively.

Question $11$ options:

$$5,925$

$$6,195$

$$6,395$

$$6,605$

$$6,795$

$$6,975$

Question $12(2$ points$)$

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The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $$40,000,$ and it falls into the MACRS $3-$year class. Purchase of the computer would require an increase in net operating working capital of $$3,000,$ which would be recovered when the computer is sold. The computer would increase the firm's before$-$tax revenues by $$20,000$ per year but would also increase operating costs by $$5,000$ 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 $23$ percent, and the project's cost of capital is $14$ percent.

What is the total value of the terminal year non$-$operating cash flows at the end of Year $3?$ Round it to a whole dollar, and do not include the $ sign.

Year

MACRS Percent

$1$

$0\mathrm{.}33$

$2$

$0\mathrm{.}45$

$3$

$0\mathrm{.}15$

$4$

$0\mathrm{.}07$

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