Build Corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000 each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $72,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 15% on all investments. What is the net after-tax cash inflow in Year 1 from the investment?

Build Corporation wants to purchase a new machine for $298,000. Management predicts that the machine can produce sales of $205,000 each year for the next 4 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $72,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 50%. Management requires a minimum after-tax rate of return of 15% on all investments. What is the net after-tax cash inflow in Year 1 from the investment?

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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