Calculate the initial cash out flow at Year 0 What are the project’s annual net incremental cash flows during Years 1, 2, and 3? Find out the terminal cash flow of the new machine at year four.
Calculate the initial cash out flow at Year 0 What are the project’s annual net incremental cash flows during Years 1, 2, and 3? Find out the terminal cash flow of the new machine at year four.
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
Related questions
Question
Estimating Incremental Cash flow After- Tax
- 1. Galaxy Fans is considering a proposal to buy a new fixing machine. The price of the machine is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3-year class, and it would be sold after 4 years for $65,000. The applicable
depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%. There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year hence it is net saving by the new machine. The firm falls in 40% tax bracket.
Required:
- Calculate the initial cash out flow at Year 0
- What are the project’s annual net incremental cash flows during Years 1, 2, and 3?
- Find out the terminal cash flow of the new machine at year four.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education