What is the supplemental operating cash flow in year

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Reference no: EM132769604

Problem 1: The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but wuld also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40%, and the project's required rate of return is 14%. What is the supplemental operating cash flow in Year 2?

a. $9,000
b. $10,240
c. $11,687
d. $13,453
e. $16,200

Reference no: EM132769604

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