Lasalle Industries is considering the purchase of a new machine that will cost $

Question

Lasalle Industries is considering the purchase of a new machine that will cost $250,000, plus an additional $10,000 to ship and install. The new machine will have a 5-year useful life and will be depreciated to zero using the straight-line method. The machine is expected to have a salvage value of $30,000 at the end of year five. LaSalle's income tax rate is 40%. The additional net working capital from this project of $50,000 is expected to return to its pre-project level upon termination. What is the non-operating terminal cash flow of the machine?

Select one:

a. -$32,000

c. $68,000

d. $80,000

Explanation / Answer

Non-operating terminal cash flow of the machine = Post Tax Salvage Value + Working Capital Recovered

Non-operating terminal cash flow of the machine = (30000 - 40%*(30000-0)) + 50000

Non-operating terminal cash flow of the machine = $ 68000

Answer

c. $68,000

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