A $95, 000 machine with a 15-year class life was purchased 4 years ago. The machine will now be replaced with a new machine costing $68, 000, with an 8 - year class life. The new machine will not increase sales but will decrease operating costs by $25,750 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project in year 1 ? a) $116,575 b) $18,576 c) $19, 798 d) $17,732 e) $13,845.

A $95, 000 machine with a 15-year class life was purchased 4 years ago. The machine will now be replaced with a new machine costing $68, 000, with an 8 - year class life. The new machine will not increase sales but will decrease operating costs by $25,750 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project in year 1 ? a) $116,575 b) $18,576 c) $19, 798 d) $17,732 e) $13,845.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 7PROB

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