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Sagot :
The amount of the operating cash flow in year 2 is $2,200
The calculation of the amount of the operating cash flow in year 2 is as follows:
But before that following calculations need to be done:
Depreciation on the new machine is
= New machine cost ÷ Useful life
= $12,000 ÷ 6
= $2,000
Now,
Incremental depreciation because of a replacement should be
=Depreciation on the new machine - Depreciation on the old machine
= $2,000 - $700
= $1,300
Now
Tax shield on depreciation is
= 25% of $1,300
= $325
Finally, the Operating cash flow in year 2 is
= (Increase in sales- Increase in operating cost) × (1 - tax rate) + Tax shield on depreciation
= ($3,000 - $500) × 0.75 + $325
= $2,200
Therefore we can conclude that the amount of the operating cash flow in year 2 is $2,200.
Hence, option d is correct.
Learn more about the operating cash flow here: brainly.com/question/17001006
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