Question

Ella Inc. is considering purchasing a new milling machine. The new machine costs $127,340, plus installation fees of $13,554 and will generate revenue of $2,803,104 per year and cost of good sold of $1,546,605 over its 7-year life. The machine will be depreciated on a straight-line basis over its 7-year life to an estimated salvage value of 0. Mystic’s marginal tax rate is 0%. Mystic will require $31,897 in NWC if the machine is purchased. Determine the annual operating cash flow in if the machine is purchased. round your answer to two decimals.

Answer #1

Annual depreciation = | 20127.71429 | ||||

(127340+13554)/7 | |||||

Computation of annual operating cash flow | |||||

i | Revenue= | 2,803,104.00 | |||

ii | Cost | 1,546,605.00 | |||

iii | Depreciation | 20,127.71 | |||

iv | Profit before tax | 1,236,371.29 | |||

v | Tax | - | |||

vi | Net income | 1,236,371.29 | |||

vii=vi+iii | Operating cash flow | 1,256,499.00 | |||

answer = |
1,256,499.00 |
||||

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