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You are evaluating a potential investment in equipment. The equipment's basic price is $158,000, and shipping...

You are evaluating a potential investment in equipment. The equipment's basic price is $158,000, and shipping costs will be $6,300. It will cost another $15,800 to modify it for special use by your firm, and an additional $7,900 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 26,300 at the end of three years. The equipment is expected to generate revenues of $147,000 per year with annual operating costs of $75,000. The firm's marginal tax rate is 25.0%. What is the after-tax operating cash flow for year 3? Question 30 options: $61,050 $32,850 $72,000 $43,800 $28,200

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Answer #1

After-tax operating cash flow for the year 3 is given as equal to=(147000-75000-(158000+6300+15800+7900)*15%)*(1-25%)+(158000+6300+15800+7900)*15%=61050

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