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Ella Inc. is considering purchasing a new milling machine. The new machine costs $127,340, plus installation...

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.

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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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