You are evaluating the acquisition of a new ski machine. Its price is $200,000, and it costs
Question:
You are evaluating the acquisition of a new ski machine. Its price is $200,000, and it costs $40,000 to install. It falls into the MACRS 3-year class. The machine will save the firm's operating costs by $125,000 per year and require a $10,000 increase in inventory when it is installed. It will be used for 4 years and then sold for $25,000. Your firm's tax rate is 40%, and the project's cost of capital is 10% (MACRS depreciation schedule for a 3-year class asset is: 33%, 45%, 15%, and 7%).
What is the initial net investment outlay in Year 0?
$240,000 |
$210,000 |
$250,000 |
$200,000 |
$230,000 You are evaluating the acquisition of a new ski machine. Its price is $200,000, and it costs $40,000 to install. It falls into the MACRS 3-year class. The machine will save the firm's operating costs by $125,000 per year and require a $10,000 increase in inventory when it is installed. It will be used for 4 years and then sold for $25,000. Your firm's tax rate is 40%, and the project's cost of capital is 10% (MACRS depreciation schedule for a 3-year class asset is: 33%, 45%, 15%, and 7%). What is the after-tax cash flow (both operating and non-operating) in Year 4?
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Business Research Methods
ISBN: 978-0073521503
12th edition
Authors: Donald R. Cooper, Pamela S. Schindler