Above still applicable 0 0 0 69600a athe total 69600

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: ill applicable. 0 0 0 $69,600a aThe total $69,600 represents the book value of the present machine at the end of the third year, as calculated in the preceding example. summing the purchase price of $380,000 and the installation costs of $20,000. The proposed machine is to be depreciated under MACRS using a 5-year recovery period.10 The resulting depreciation on this machine for each of the 6 years, as well as the remaining 3 years of depreciation (years 4, 5, and 6) on the present machine, are calculated in Table 8.6.11 The operating cash inflows in each year can be calculated by using the income statement format shown in Table 8.7. Substituting the data from Tables 8.5 and 8.6 into this format and assuming a 40% tax rate, we get Table 8.8. It demonstrates the calculation of operating cash inflows for each year for both the proposed and the present machine. Because the proposed machine is depreciated over 6 years, the analysis must be performed over the 6-year period to capture fully the tax effect of its year-6 depreciation. The resulting...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online