Outback Is Purchasing a New Machine That Will Cost $98,000

question 77

Multiple Choice

Outback is purchasing a new machine that will cost $98,000. The machine will qualify as MACRS 5-year property but has an economic life of 8 years. The new machine is expected to increase revenues by $35,000 per year, and operating costs are expected to increase by $15,000 per year. If the firm's marginal tax rate is 34 percent and the first year's depreciation rate is 20 percent, what is the net cash flow in the first year.

• A) $264
• B) $7,984
• C) $19,864
• D) $26,034

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Definitions:

Incongruent

Referring to situations or elements that are not consistent or in harmony with each other.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Information

Data that has been processed, organized, or presented in a given context to make it meaningful or useful.

Belief

An acceptance that something exists or is true, especially without proof.