Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost $190,000, and it will cost another $33,000 to modify it for special use by the firm
The machine falls into the MACRS 3-year class, and it will be sold after 3 years of use for $110,000. The machine will require an increase in net working capital of $9,000 and will have no effect on revenues, but is expected to save the firm $90,000 per year in before-tax operating costs, mainly labour. The company's marginal tax rate is 40%. What are the terminal year cash flows?
MACRS Depreciation Rates
Year 3-Year 5-Year
1 33.33% 20.00%
2 44.45% 32.00%
3 14.80% 19.20%
A) $93,649
B) $102,649
C) $148,820
D) $179,470
E) $188,740
C
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What will be an ideal response?
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