ABC Purchased a Machine for $2,575,000

question 42

Multiple Choice

ABC purchased a machine for $2,575,000. Required modifications will cost $375,000. ABC will need to invest $75,000 for additional inventory. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. It will only be operated for 3 years, after-which it will be sold for $600,000. ABC plans to depreciate the machine by using the straight-line method. Assume that the firm's tax rate is 40%. What is the termination (non-operating) cash flow from the machine in year three?

• A) $900,623
• B) $1,109,286
• C) $1,298,114
• D) $879,247

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Definitions:

Rupees

The official currency of India, symbolized as INR, and used in financial transactions within the country.

Import

The act of bringing goods or services from a foreign country for sale or use.