Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a new children’s toy. The machine will increase EBITDA by $215,000 per year for the next two years. The machine’s purchase price is $260,000 and the salvage value at the end of two years is $46,800. The machine is classified as 3-year property with MACRS depreciation rates for the first two years of 33.33% and 44.45%. The depreciation expense in Year 1 is $86,658. The tax rate is 35%. What are the operating cash flows for the project in Year 1? (Include the depreciation tax shield.) Round to the nearest dollar.

Answer rating: 100% (QA)

To calculate the operating cash flows for Year 1 we need to take into account the increase in EBITDA ... View the full answer