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Previous Page Next Page Page 3 Question 4 (6 points) Eastern Inc. purchases a machine for $70,000. This machine qualifies as a five-year recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. The firm has a tax rate of 40%. If the machine is sold at the end of two years for $50,000, what is the cash flow from disposal(termination value of the asset)? 1) $33,600 2) $39,875 3) $43,440 4) $50,000 Question 5 (8 points) What is the annual operating cash flow (OCF) for a 10-year project that has annual sales of $680,000, its variable costs are 80% of sales and has annual fixed costs of $110,000. The project requires new equipment at a cost of $30,000 and installation costs of $2,000 and a plant that costs $70,000. Depreciation is under the straight line method and the equipment has an estimated life of 10 years and the plant an estimated life of 30 years. The tax rate is 20% and the discounting rate is 10%. In your answer, use commas to separate thousands, do not use the dollar $ sign, and round to the nearest two decimals. For example, if your answer is $34,456.729 then enter 34,456.73. If answer is a negative cash flow, enter the minus sign in front of the first number (do not enter a parenthesis to represent a negative number). For example, if your answer is - $2,511.00 then enter -2,511.00 Your