Question 25 Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $20,000 to ins machine and Builtrite will need to keep an extra $7,000 in inventory on hand due to the machine's efficiency. The current machine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. If the current machine were sold today, it could be sold for $45,000. In four years, the new machine is estimated to have a salvage value of $32,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine in expected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket. What is the terminal cash flow for the new machine at the end of year 4?
Question 25 Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $20,000 to ins machine and Builtrite will need to keep an extra $7,000 in inventory on hand due to the machine's efficiency. The current machine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. If the current machine were sold today, it could be sold for $45,000. In four years, the new machine is estimated to have a salvage value of $32,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine in expected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket. What is the terminal cash flow for the new machine at the end of year 4?
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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Transcribed Image Text:D Question 25
Builtrite is considering the purchase of a new five-year machine worth $90,000. It will cost another $20,000 to install the
machine and Builtrite will need to keep an extra $7,000 in inventory on hand due to the machine's efficiency. The current
machine being used is 5 years old and originally cost $60,000 and is being depreciated down to zero over a 10-year period. If
the current machine were sold today, it could be sold for $45,000. In four years, the new machine is estimated to have a
salvage value of $32,000. Two employees will need to be trained for the new machine at a cost of $4000. The new machine is
expected to produce $80,000 in annual savings. Builtrite is in the 34% tax bracket.
What is the terminal cash flow for the new machine at the end of year 4?
$21,120
O$28,600
O $35,600
O $39.600
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