Daily Enterprises is purchasing a $ 10.3 million machine. It will cost $ 48 comma 000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of $ 4.2 million per year along with incremental costs of $ 1.1 million per year. If Daily's marginal tax rate is 35 %, what are the incremental earnings (net income) associated with the new machine?
Incremental earnings (net income) = $669760
Explanation;
Incremental revenues |
$4200000 |
Less: Incremental costs |
($1100000) |
Less: Depreciation ($10348000 / 5) |
($2069600) |
Incremental Income before taxes |
$1030400 |
Less: Taxes @ 35% |
($360640) |
incremental earnings (net income) associated with the new machine |
$669760 |
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