A $63,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $80,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $15,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?

A $63,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $80,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $15,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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