Answered

Westonci.ca offers quick and accurate answers to your questions. Join our community and get the insights you need today. Ask your questions and receive accurate answers from professionals with extensive experience in various fields on our platform. Explore comprehensive solutions to your questions from knowledgeable professionals across various fields on our platform.

A $64,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $82,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $9,000 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

Sagot :

abiolataiwo2015

Answer:

$6,779

Explanation:

Calculation to determine the incremental annual cash flow associated with the project

First step is to calculate the depreciation

Depreciation=[($64,000/6 years)-($82,000/10 years)

Depreciation=$10,667-$8,200

Depreciation=$2,467

Now let calculate the Incremental annual cash flow

Incremental annual cash flow ={($9,000-$2,467)

-[($9,000-$2,467)*34%]+$2,467}

Incremental annual cash flow =[($6,533-$2,221)+$2,467]

Incremental annual cash flow =$4,312+$2,467

Incremental annual cash flow=$6,779

Therefore the incremental annual cash flow associated with the project is $6,779

Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.