Question 5 A $60,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $79,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $9,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
Question 5 A $60,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $79,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $9,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project?
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:Question 5
A $60,000 machine with a 6-year class life was
purchased 2 years ago. The machine will now
be sold for $50,000 and replaced with a new
machine costing $79,000, with a 10-year class
life. The new machine will not increase sales,
but will decrease operating costs by $9,000 per
year. Simplified straight line depreciation is
employed for both machines, and the marginal
corporate tax rate is 34 percent. What is the
incremental annual cash flow associated with
the project?
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