Question

Question 30 (3.5 points) You are evaluating a potential investment in equipment. The equipment's basic price is $190,000, and shipping costs will be $5,700. It will cost another $24,700 to modify it for special use by your firm, and an additional $11,400 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15 % the third year, and 7% the fourth year. You expect to sell the equipment for 27,800 at the end of three years. The equipment is expected to generate revenues of $181,000 per year with annual operating costs of $92,000. The firm's marginal tax rate is 40.0%. What is the after-tax operating cash flow for year 3? $67,308 $32,538 $89,000 $54,230 $34,770

Answer 1

Select - (a) 67308

Annual revenue ... .... 181,000 (2) annual operating cost ... 92,000 99,000 (6) Depreciation 34,770 - Profet before tax ...... (6) Tax a hoy. ... ...... 21,692 32,538 (t) Depreciation ....... 34 Y TO operating cash flow: 67,308 54, 230 Depreciation - Asset cost = 190,000 + 5700 & 24700 + 11,400 ....... = 231,800 Depreciation year-3 = 2B1800 x 15%. = 34,770