Question: The base price is $4,000 and it would cost another $1,000 to modify the machine to install the machine. The equipment falls in the MACRS

The base price is $4,000 and it would cost another $1,000 to modify the machine to install the machine. The equipment falls in the MACRS 3 year class of depreciation with rates of 33%, 45%, 15% and 7%. The machine would require an investment in snacks (inventory/net operating working capital) of $500. The machine would produce revenue of $3,000 peryear with costs of $534 per year. The firm's tax rate is 20%.

The firm plans on selling the machine at the end of three years for $1500 and recovering their investment in net working capital at that time as well.

What is the operating cash flow associated with the first year of operation?

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