Challenging Business Problems with Detailed Answers
Stanton Inc. is considering the purchase of a new machine, which will reduce manufacturing costs by $5,000 annually and increase earnings before depreciation and taxes by $6,000 annually. Stanton will use the MACRS method to depreciate the machine, and it has estimated the depreciation expense for the first year as $8,000. Which of the following is the supplemental operating cash flow for the first year if Stanton's marginal tax rate is 40 percent?a.$40,000b.$15,000c.$9,800d.$4,500e.$23,000
a company is evaluating 3 possible investments. each uses straight-line depreciation. see data below: project a project b project c investment $400,000 $20,000 $100,000 salvage value $0 $2,000 $5,000 net cash flows: year 1 $100,000 $10,000 $40,000 year 2 $100,000 $8,000 $25,000 year 3 $100,000 $5,000 $30,000 year 4 $100,000 $3,000 $10,000 year 5 $100,000 $0 $0