What will be the adjusted total cash flow of machining tool

Reference no: EM132068133

Question: You're evaluating the proposed acquisition of a new machining tool for $88,000 by your company. The tool falls into the MACRS three-year class, and it will be fully depreciated after three years and sold at the time for $26,000. Use of the tool requires an increase in NWC (spare parts inventory) of $3,500. The tool will have no effect on revenues, but it's expected to save the firm $24,000 per year in before-tax operating costs, mostly labor. The firm's marginal tax rate is 38 percent. What will be the adjusted total cash flow (ATCF) from the sale of the machining tool?

Reference no: EM132068133

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