Question: Buitrite is considering purchasing a new machine that would cost $75,000 and the machine would be depreciated (straight line) down to S0 over its five-year
Buitrite is considering purchasing a new machine that would cost $75,000 and the machine would be depreciated (straight line) down to S0 over its five-year life. At the end of five years, it is believed that the machine could be sold for $15,000. The current machine being used was purchased 2 years ago at a cost of $50,000 and it is being depreciated down to zero over its 5year life. The current machine's salvage value now is $35,000. Also, a higher level of inventory would be needed in the amount of $3000 for the new machine. The new machine would increase EBDT by $56,000 annually. Builtrite's marginal tax rate is 34% What is the TCF associated with the purchase of this machine? $9,900 $12,900 $14,300 $17,300
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