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What is the project aftertax operating cash flow

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Reference no: EM132000599

Consider the following for questions 4448:

A new product is being considered by Stanton Corp. An outlay of $40,000 is required for equipment and an additional net working capital investment of $1000 is required. The project is expected to have a 4 year life and the equipment will be depreciated on a straight line basis (equal annual amount) to a $4,000 book value.

Producing the new product will reduce current manufacturing expenses by $5,000 annually and increase earnings (revenue) before depreciation and taxes by $6,000 annually. Stanton's marginal tax rate is 40 percent. Stanton expects the equipment will have a market salvage value of $10,000 at the end of 4 years.

Question: Regardless of your answer to number 45 above, ASSUME DEPRECIATION = $8,000 per year. What is the project's aftertax operating cash flow during years 14 from the machine?

  • 11,000
  • 3,000
  • 6,600
  • 14,600
  • 9,800

Reference no: EM132000599

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