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Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost ...

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Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost ...

Jones Crusher Company is evaluating the proposed acquisition of a new machine. The machine will cost $190,000, and it will cost another $33,000 to modify it for special use by the firm. The machine falls into the MACRS 3-year class, and it will be sold after 3 years of use for $110,000. The machine will require an increase in net working capital of $9,000 and will have no effect on revenues, but is expected to save the firm $90,000 per year in before-tax operating costs, mainly labour. The company's marginal tax rate is 40%. What are the terminal year cash flows?

MACRS Depreciation Rates

Year	3-Year	5-Year
1	33.33%	20.00%
2	44.45%	32.00%
3	14.80%	19.20%

▸ $93,649

▸ $102,649

▸ $148,820

▸ $179,470

▸ $188,740

Textbook

Corporate Finance Online

Edition: 2^nd

Authors: Eakins, McNally

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