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

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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