ABC Will Purchase a Machine That Will Cost $2,575,000

question 114

Multiple Choice

ABC will purchase a machine that will cost $2,575,000.Required modifications will cost $375,000.ABC will need to invest $75,000 for additional inventory.The machine has a useful life of 7 years;it is presumed to have no salvage value.ABC plans to depreciate the machine by using the straight-line method.The machine is expected to increase ABC's sales revenues by $1,890,000 per year;operating costs excluding depreciation are estimated at $454,600 per year.Assume that the firm's tax rate is 40%.What is the annual operating cash flow?

• A)$922,464
• B)$1,126,287
• C)$813,563
• D)$1,029,811

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