Build Corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000 each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $72,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 15% on all investments. What is the net after-tax cash inflow in Year 1 from the investment?

Build Corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000 each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $72,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 15% on all investments. What is the net after-tax cash inflow in Year 1 from the investment?

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Build corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000 each year for the next four years.

TB MC Qu. 12-57 (Algo) Net after-tax cash inflow in Year 1 from the investment: Build Corporation
Build Corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000
each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation)
totaling $72,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income
tax rate is 50%. Management requires a minimum after-tax rate of return of 15% on all investments.
What is the net after-tax cash inflow in Year 1 from the investment?

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