Annual after-tax operating cash flow

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Reference no: EM131905722

Macro Incorporated is the manufacturer of mini-excavators and is considering producing a new line of equipment in an effort to increase its market share. The new production line will cost $2, 550,000 for manufacturing the parts and an additional $630,000 is needed for installation. The equipment falls into the MACRS 3-yr class, and would be sold after four years for $600,000.

The equipment line will generate additional annual revenues of $950,000 in year 1, and $1,250,000 in the following years until the sale of the equipment. The project will attract additional annual operating expenses of $600,000. An inventory investment of $253,000 is required during the life of the project. Macro is in the 20 percent tax bracket, and its existing cost of capital is 6 percent.

A. Calculate the annual after-tax operating cash flow for Years 1 - 4.

Reference no: EM131905722

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