The president of real-time Inc. has asked you to evaluate the proposed acquisition of a new...

 

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The president of real-time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer price is $50,000 and it falls into MACRS-3 year class. The purchase of the computer would require an increase in spare parts inventory of $3,000. Account payables will also increase by $2,000. The computer would increase the firms before - tax revenue by $20,000 per year but it would also increase the operating cost by $5,000 per year. The annual interest expense is $500 per year. The computer is expected to be used for 3 years and then be sold for $35,000. The firm's marginal tax rate is 20%, and the projects cost of capital is 12% MACRS Depreciation Rates Year 1: 33% Year 2: 45% Year 3: 15% Year 4: 7% what is the operating cash flow in year 3? The president of real-time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer price is $50,000 and it falls into MACRS-3 year class. The purchase of the computer would require an increase in spare parts inventory of $3,000. Account payables will also increase by $2,000. The computer would increase the firms before - tax revenue by $20,000 per year but it would also increase the operating cost by $5,000 per year. The annual interest expense is $500 per year. The computer is expected to be used for 3 years and then be sold for $35,000. The firm's marginal tax rate is 20%, and the projects cost of capital is 12% MACRS Depreciation Rates Year 1: 33% Year 2: 45% Year 3: 15% Year 4: 7% what is the operating cash flow in year 3?

Answer rating: 100% (QA)

To calculate the operating cash flow in year 3 we need to consider the beforetax revenue operating c... View the full answer