Builtrite is considering purchasing a new machine that would cost $70,000 and the machine would be...

  

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Builtrite is considering purchasing a new machine that would cost $70,000 and the machine would be depreciated (straight line) down to $0 over its five year life. Due to machine efficiencies, an extra $4000 in inventory would have to be held for the new machine. 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 $46,000 annually. Builtrite's 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)? Builtrite is considering purchasing a new machine that would cost $70,000 and the machine would be depreciated (straight line) down to $0 over its five year life. Due to machine efficiencies, an extra $4000 in inventory would have to be held for the new machine. 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 $46,000 annually. Builtrite's 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)?

Answer rating: 100% (QA)

To calculate the Total Cash Flow TCF associated with the purchase of the new machine if it is sold a... View the full answer