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A new $110,000 machine will be depreciated using a 5-year MACRS schedule. It should generate $45,000...

A new $110,000 machine will be depreciated using a 5-year MACRS schedule. It should generate $45,000 per year in additional revenues, and $20,000 per year in additional cash operating costs per year. If the firm has a tax rate of 39%, calculate the year 4 incremental net operating cash flow.

$28,891

$20,192

$41,927

$19,021

none of the above

Solutions

Expert Solution

rate posiively ..

Depreciation under MARCS depreciation method
MARCs Depreciation table
Year Rate Depreciation Accumulated Depreciation Book Value
0 $0.00 $0.00 $110,000.00
1 20.00% $22,000 $22,000 $88,000
2 32.00% $35,200 $57,200 $52,800
3 19.20% $21,120 $78,320 $31,680
4 11.52% $12,672 $90,992 $19,008
5 11.52% $12,672 $103,664 $6,336
6 5.76% $6,336 $110,000 $0
Computation of operating cash flow
year year 4
Revenue              45,000
Cost              20,000
depreciation              19,008
Profit before tax                5,992
Tax @ 39%                2,337
Net income                3,655
Operating cash flow=(net income+ dep)              22,663
anwer= None of the above

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