Al's Fabrication Shop Is Purchasing a New Rivet Machine to Replace

question 70

Multiple Choice

Al's Fabrication Shop is purchasing a new rivet machine to replace an existing one.The new machine costs $8000 and will require an additional cost of $1000 for modification and training.It will be depreciated using simplified straight line depreciation over five years.The new machine operates much faster than the old machine and with better quality.Consequently, sales are expected to increase by $2100 per year for the next five years.While it is faster, it is fully automated and will result in increased electricity costs for the firm by $700 per year.It will, however, save about $850 per year in labor costs.The old machine is 20 years old and has already been fully depreciated.If the firm's marginal tax rate is 28%, calculate the after tax incremental cash flows for the new machine for years 1 through 5.

• A)$2698
• B)$450
• C)$2124
• D)$1620

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Definitions:

Health Care Demanded

The amount of medical services that people are ready and capable of buying at a specific price point.

Marginal Cost

The cost of producing one additional unit of a good or service, a crucial concept for understanding economic decision-making.

Average Total Cost

The total cost of production divided by the number of goods produced, indicating the cost per unit of output.

Overconsumption

The excessive use of goods and services, surpassing what is necessary and sustainable.