Tech Engineering Company is considering the purchaseof a new machine. The new machine, which falls into theMACRS 5-year class, has an estimated life of 5 years, andit costs $40,000 to purchase the machine. Tech plans tosell the machine at the end of the fifth year for $12,000.Initial decrease in accounts payable = $3,000, whichmust be restored at the end of the project's life. Theapplicable depreciation rates are 0.20, 0.32, 0.19, 0.12,0.11, and 0.06. The new machine is expected to generatebefore-tax cash savings of $13,000 per year. Thecompany's tax rate is 30%. What is the year 5 total freecash flow of the proposed project?Group of answer choices$24,540$32,540$22,540$27,540$29,540

Cost of machine = $40,000Before-tax cash savings = $13,000Tax rate = 30%Decrease in Accounts payable…

Answered: Tech Engineering Company is considering…

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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