Daily Enterprises is purchasing a $10.1 millionmachine. It will cost $52,000 to transport and installthe machine. The machine has a depreciable life offive years using straight-line depreciation and willhave no salvage value. The machine will generateincremental revenues of $4.1 million per year alongwith incremental costs of $1.3 million peryear. Daily's marginal tax rate is 21%. You areforecasting incremental free cash flows for DailyEnterprises. What are the incremental free cashflows associated with the new machine?The free cash flow for year 0 will be $ (Round tothe nearest dollar.)

The problem requires the determination of the free cash flows for the year. Free cash flow (FCF) is…

Answered: Daily Enterprises is purchasing a $10.1…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 18E

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Daily Enterprises is purchasing a $9.8 million machine. It will cost $47,000 to transport and install the machine. The machine has a depreciable life of 5 years, is using straight-line depreciation, and will have no salvage value. The machine will generate incremental revenues of $3.6 million per year along with incremental costs of $1.12 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. a. If Daily Enterprises decides to use MACRS instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? b. Under the TCJA of 2017, Daily Enterprises has the option to take 100% "Bonus" depreciation in the year in which the equipment is put into use. This means that in that year, it would take the full depreciation expense equivalent to the cost of buying the equipment. If Daily does so, which cash flows would increase and which would decrease? How does this compare to…
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Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent. nts Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Print Depreciation tax shield eferences 00
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