A $67,000 machine with a 7-year class life was purchased 2 years ago. The machine will...

 

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A $67,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $88,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $13,000 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? A $67,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $88,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $13,000 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?

Answer rating: 100% (QA)

To calculate the incremental annual cash flow associated with the project we need to consider severa... View the full answer