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What is the annual operating cash flow

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Question - The Canton Sundae Corporation is considering the replacement of an existing machine. The new machine, called an X-tender, would provide better sundaes, but it costs $200,000. The X-tender requires $50,000 in additional net working capital, which will be recouped at the end of the project. The machine's useful life is 8 years, after which it can be sold for a salvage value of $25,000. Straight-line depreciation will be used and the machine will be depreciated to zero over the 8-year project. The tax rate is 35% and the required return is 12%. The machine is expected to result in cost savings of $75,000 per year. What is the annual operating cash flow?

a. $75,000

b. $57,500

c. $60,400

d. $24,650

Reference no: EM133011697

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