Question: Builtrite is considering purchasing a new machine that would cost $70,000 and the machine be depreciated (straight line) down to $0 over its 10 year

Builtrite is considering purchasing a new machine that would cost $70,000 and the machine be depreciated (straight line)

down to $0 over its 10 year life. At the end of 10 years it is belie that the machine could be sold for $10,000. The current machine being used was purchased years ago at a cost of $25,000 and it is being depreciated down to zero over its 5 year life. Th current machine's salvage value now is $15,000. The new machine would increase EBDT by $45,000 annually.

Builtrite's marginal tax rate is 34%. What the RATFCF's associated with the purchase of this machine?

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