Propell Inc is considering the purchase of a new machine that will cost $178,000, plus an additional
$12,000 to ship and install. The new machine will have a 5-year useful life and will be depreciated
using the straight-line method.
The machine is expected to generate new sales of $85,000 per year
and is expected to increase operating costs by $10,000 annually. Propell's income tax rate is 40%.
What is the projected incremental cash flow of the machine for year 1?
A) $66,350 B) $60,200 C) $68,200 D) $54,800
B
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