Question
In: Finance
You are considering an investment in a new machine. The firm’s tax rate is 30%. Answer...
You are considering an investment in a new machine. The firm’s tax rate is 30%. Answer this question in Excel. Please highlight or circle your answers. The machine is expected to have the following:
|
Year |
Change in revenue |
Change in expenses |
After tax increases in revenue |
Change in depreciation |
Tax benefit of depreciation |
Change in net working capital |
Change in capital spending |
Incremental Cash Flow |
|
0 |
0 |
0 |
0 |
+20,000 |
+100,000 |
=120,000 |
||
|
1 |
+20,000 |
+5,000 |
=10,500 |
15,000 |
+2,000 |
0 |
||
|
2 |
+20,000 |
+5,000 |
=10,500 |
15,000 |
+2,000 |
0 |
||
|
3 |
+20,000 |
+5,000 |
=17,500 |
15,000 |
-5,000 |
-15,000 |
||
|
4 |
+30,000 |
+5,000 |
=17,500 |
+20,000 |
+2,000 |
0 |
||
|
5 |
+30,000 |
+5,000 |
=17,500 |
+20,000 |
-21,000 |
-20,000 |
a) What is the expected incremental cash flow each year for this new machine?
b) Should you approve this project? Why or why not?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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