Marc Corporation wants to purchase a new machine for $400,000. Management predicts that the machine will produce sales of $275,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The company uses MACRS for depreciation. The machine is considered to be a 3- year property and is not expected to have any significant residual value at the end of its useful life. Marc's tax rate, t, is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. A partial MACRS depreciation table is reproduced below. Year 3-year property 5-year property 1 2 3 4 5 33.33 6 44.45 14.81 7.41 20.00 32.00 19.20 11.52 11.52 5.76 What is the annual after tax cash flow (AATCF) in Year 1 from the proposed investment (rounded to the nearest thousand)?

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
icon
Related questions
icon
Concept explainers
Topic Video
Question

Please help me. 

Fast solution please. 

Thankyou. 

Marc Corporation wants to purchase a new machine for $400,000. Management predicts that the machine will produce sales of
$275,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead
(excluding depreciation) totaling $80,000 per year. The company uses MACRS for depreciation. The machine is considered to be a 3-
year property and is not expected to have any significant residual value at the end of its useful life. Marc's tax rate, t, is 40%.
Management requires a minimum after-tax rate of return of 10% on all investments. A partial MACRS depreciation table is
reproduced below.
Year 3-year property 5-year property
1
20.00
2
3
4
5
6
33.33
44.45
14.81
7.41
32.00
19.20
11.52
11.52
5.76
What is the annual after tax cash flow (AATCF) in Year 1 from the proposed investment (rounded to the nearest thousand)?
Transcribed Image Text:Marc Corporation wants to purchase a new machine for $400,000. Management predicts that the machine will produce sales of $275,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The company uses MACRS for depreciation. The machine is considered to be a 3- year property and is not expected to have any significant residual value at the end of its useful life. Marc's tax rate, t, is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. A partial MACRS depreciation table is reproduced below. Year 3-year property 5-year property 1 20.00 2 3 4 5 6 33.33 44.45 14.81 7.41 32.00 19.20 11.52 11.52 5.76 What is the annual after tax cash flow (AATCF) in Year 1 from the proposed investment (rounded to the nearest thousand)?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Capital Budgeting
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.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
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…
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