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Business, 26.11.2019 19:31 sherifour

Premier steel, inc. is considering the purchase of a new machine for $100,000 that has a useful life of 3 years. the firm’s cost of capital is 11.0% and the tax rate is 40%. this machine will be sold for its salvage value of $20,000 at the end of 3-years. the machine will require an investment of $2,500 in spare parts inventory upon installation. the machine will cost $8,000 to ship and $4,000 to install and modify it. sales are as follows: year 1 = $90,000; year 2 = $97,500; year 3 = $105,000. operating expenses are year 1 = $25,000; year 2 = $27,000; year 3 = $29,000. the investment in working capital will be liquidated at termination of the project at the end of year 3. macrs rates 33% 45% 15% 7% using macrs, what is the operating cash flow in year 1?

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