You are evaluating the proposed acquisition of a new computer The computer\'s pr

Question

You are evaluating the proposed acquisition of a new computer The computer's price is s 6 0,000, and it falls into the MACRS operating working capital of s2,000. The computer would ncrease the firm's before-tax revenues by S 3-year class Purchase of the computer would require an increase in net 28,000 per year but would also increase operating costs by s 13,000 per year The computer is expected to be used for 3 years and then be sold for $25,000 The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent What is the operating cash flow in Year 2" Round it to a whole dollar, and do not include the S sign Year MACRS Percent 0 33 2 045 s 0 15 07

Explanation / Answer

Before tax revenue 28000 Before tax operating cost (13000) Depreciation [60000*.45] (27000) Income before tax (12000) less:Tax saving due to loss [-12000*.40] 4800 Income after tax (7200) Depreciation 27000 operating cash flow in year 2 19800

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.