Marchal Company is evaluating the proposed acquisition of a new machine. The machine's base price is $240,000, and it would cost another $15,000 to modify it for special use. The machine falls into the MTheACRS 3-year class, and it would be sold after 2 years for $65,000. The machine would require an increase in net working capital of $5,000. The machine would have no effect on revenues, but it is expected to save the firm $80,000 per year for 2 years in before-tax operating costs. The company's marginal tax rate is 21% and its cost of capital is 11%. A. Calculate the cash outflow at time zero. B. Calculate the net operating cash flows for Years 1 and 2. C. Calculate the non-operating terminal year cash flow.
Marchal Company is evaluating the proposed acquisition of a new machine. The machine's base price is $240,000, and it would cost another $15,000 to modify it for special use. The machine falls into the MTheACRS 3-year class, and it would be sold after 2 years for $65,000. The machine would require an increase in net working capital of $5,000. The machine would have no effect on revenues, but it is expected to save the firm $80,000 per year for 2 years in before-tax operating costs. The company's marginal tax rate is 21% and its cost of capital is 11%.
A. Calculate the
B. Calculate the net operating cash flows for Years 1 and 2.
C. Calculate the non-operating terminal year cash flow.
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