Question: Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five

Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of four years it is believed that the machine could be sold for $18,000. The current machine being used was purchased 3 years ago at a cost of $40,000 and it is being depreciated down to zero over its 5 year life. The current machine's salvage value now is $20,000. The new machine would increase EBDT by $42,000 annually. Builtrites marginal tax rate is 34%.

What is the TCF associated with the purchase of this machine if it is sold at the end of year 4 (NOT year 5)?

A. $18,000

B. $11,880

C. $6,000

D. $15,960

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