The firm has an ordinary tax rate of 40 note answer

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: operating cash inflows will result from the renewal? LG5 8–17 Incremental operating cash inflows—Expense reduction Miller Corporation is considering replacing a machine. The replacement will reduce operating expenses (that is, increase revenues) by $16,000 per year for each of the 5 years the new machine is expected to last. Although the old machine has zero book value, it can be used for 5 more years. The depreciable value of the new machine is $48,000. The firm will depreciate the machine under MACRS using a 5-year recovery period (see Table 3.2 on page 100 for the applicable depreciation percentages) and is subject to a 40% tax rate on ordinary income. Estimate the incremental operating cash inflows generated by the replacement. (Note: Be sure to consider the depreciation in year 6.) LG5 8–18 Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that will last 5 more years. The new lathe is expected to have a 5-year life and de...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online