You have been asked to evaluate a proposed investment in new equipment. The equipment’s price is $39534, and will be depreciated straight-line over a three year life. Purchase of the new equipment would require an increase in net operating working capital of $5,000. The new acquisition would increase the firm's before-tax revenues by $22,000 per year but would also increase operating costs by $6,000 per year. The new equipment is expected to be used for 3 years and then be sold. The firm's marginal tax rate is 30%. What is the net operating cash flow in Year 1?.

Answer rating: 100% (QA)

The net operating cash flow in Year 1 can be calculated as follows Increase in Revenues 22000 Inc... View the full answer