In: Finance
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 |
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$20,192 |
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$41,927 |
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$19,021 |
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none of the above |
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 |