ABC will purchase a machine that will cost $2,575,000.Required modifications wil
ID: 2661949 • Letter: A
Question
ABC will purchase a machine that will cost $2,575,000.Required modifications will cost $375,000. ABC will need to invest$75,000 for additional inventory. The machine has an IRS approveduseful life of 7 years; it is presumed to have no salvage value.ABC plans to depreciate the machine by using the straight linemethod. The machine is expected to increase ABC's sales revenues by$1,890,000 per year; operating costs excluding depreciation areestimated depreciation are estimated at$454,600 per year. Assumethat the firm's tax rate is 40%. What is the annual operating cashflow? a) $922,464 b) $1,126,287 c) $813,563 d) $1,029,811 ABC will purchase a machine that will cost $2,575,000.Required modifications will cost $375,000. ABC will need to invest$75,000 for additional inventory. The machine has an IRS approveduseful life of 7 years; it is presumed to have no salvage value.ABC plans to depreciate the machine by using the straight linemethod. The machine is expected to increase ABC's sales revenues by$1,890,000 per year; operating costs excluding depreciation areestimated depreciation are estimated at$454,600 per year. Assumethat the firm's tax rate is 40%. What is the annual operating cashflow? a) $922,464 b) $1,126,287 c) $813,563 d) $1,029,811Explanation / Answer
d) $1,029,811 Sales $1,890,000 Less: Operatingexpenses $ 454,600 Net Cash fromoperation $1,435,400 Less:Depreciation $ 421,429 ($2,575,000+ $375,000) / 7 Income beforetaxes $1,013,971 Less: Taxes@40% $ 405,589 Income aftertaxes $ 608,382 Add:Depreciation $ 421,429 $1,029,811Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.