A new machine costing $100,000 is expected to save the MchKaig Brick Company $15,000 per year for 12 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 12-year period to an estimated salvage value of $0. The firm’s marginal tax rate is 40 percent. What are the annual net cash flows associated with the purchase of this machine? Also compute the net investment (NIN) for this project.
A new machine costing $100,000 is expected to save the MchKaig Brick Company $15,000 per year for 12 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 12-year period to an estimated salvage value of $0. The firm’s marginal tax rate is 40 percent. What are the annual net cash flows associated with the purchase of this machine? Also compute the net investment (NIN) for this project.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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2. A new machine costing $100,000 is expected to save the MchKaig Brick Company $15,000 per year for 12 years before depreciation and taxes. The machine will be
Transcribed Image Text:2. A new machine costing $100,000 is expected to save the MchKaig Brick Company
$15,000 per year for 12 years before depreciation and taxes. The machine will be
depreciated on a straight-line basis for a 12-year period to an estimated salvage value of
$0. The firm's marginal tax rate is 40 percent. What are the annual net cash flows
associated with the purchase of this machine? Also compute the net investment (NIN) for
this project.
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