XYZ Company is considering whether a project requiring the purchase of new equipment is worth investing. The cost of a new machine is $340,000 including shipping and installation. The project will increase annual revenues by $400,000 and annual costs by $100,000. The machine will be depreciated via straight-line depreciation for three years to a salvage value of $40,000. If the firm does this project, $30,000 in net working capital will be required. What is the annual cash flow of this project in the second year if the tax rate is 40%? Round to the nearest penny. Do not include a dollar sign in your answer.
|Income before tax||$ 200,000|
|Less: taxes||$ (80,000)|
|Net income||$ 120,000|
|Add: depreciation||$ 100,000|
|Operating cash flow||$ 220,000|
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