Asked by Whitney
3. Your firm is considering buying a new machine that costs $200,000, is expected to generate $110,000 in new revenue each year and will cost $45,000 a year to operate. If your firm's marginal income tax rate is 35% what is the Net Cash Flow your firm will realize from the new machine during the first year? Assume the MACRS depreciation rate for the machine for year 1 is 20%. Note - do not include the cost of the machine in your answer.
Answers
Answered by
Lara
The net operating cash flow generated year 1 is $ 85,500.
computed as follows:
Incremental income $ 110,000
Less Depreciation 40,000 ( 20% of 200,000)
Net Income after depreciation $ 70,000
Income Tax 35% $ 24,500 ( 35% of 70,000)
Net Income after Tax 45,500
Add : depreciation 40,000
Cash Flow Generated Year 1 85,500
computed as follows:
Incremental income $ 110,000
Less Depreciation 40,000 ( 20% of 200,000)
Net Income after depreciation $ 70,000
Income Tax 35% $ 24,500 ( 35% of 70,000)
Net Income after Tax 45,500
Add : depreciation 40,000
Cash Flow Generated Year 1 85,500
Answered by
will
yes
There are no AI answers yet. The ability to request AI answers is coming soon!
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.