Reference no: EM131910279

A new machine costing $1,750,000 is considered three-year property and is being depreciated using the four MACRS rates provided below. The machine will produce $1,575,000 in annual revenues and $787,500 in annual cash expenses. Assume a 35% tax rate. What is the operating cash flow in year 3 (round to the nearest dollar)?

MACRS Rate - Year 1: 33.33%

MACRS Rate - Year 2: 44.45%

MACRS Rate - Year 3: 14.81%

MACRS Rate - Year 4: 7.41%

A new piece of specialty equipment costs $2,500,000 and will be depreciated to an expected salvage value of $400,000 on a straight-line basis over its 3-year life. Assuming a tax rate of 35%, what is its after-tax salvage value if the equipment is actually sold after 2 years for $950,000?

A firm currently sells $2,250,000 annually of an expensive product line. That firm is considering a similar, less expensive, discount line, and projects sales of $420,000. The discount line is expected to reduce sales of the expensive product line to $2,000,000. What is the incremental revenue associated with the discount product line?

Project Z will result in unit sales of 2,250, at a price of $650 each. The variable cost (VC) of each unit is $325. The cost accountant will allocate overhead on the existing plant to Project Z at a rate of $21 per unit. A special piece of equipment must be leased for $75,000 per year for purposes related solely to Project Z. Project Z will reduce sales of the same company’s Project X by 900 units (selling price of $950 with variable cost of $510 and overhead allocation of $32 per unit). What is the total incremental cash flow for Project Z?