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You are considering purchasing a new piece of equipment which uses a new technology to cut...

You are considering purchasing a new piece of equipment which uses a new technology to cut costs.
  • The machinery would cost $9,409, should last 17 years, after which could be scrapped for $882.
  • The equipment should increase annual revenues by $7,225 and decrease annual operating costs by $1,843.
  • You have spent $1,525 training your current employees to use the new technology.
  • The firm's effective corporate tax rate is 32%.
Using straight line depreciation, determine the Year 1 incremental annual cash flow that would result from this purchase decision.   Enter your answer in decimal format to two decimal places (e.g., $1,538.72 would be entered as 1538.72).
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Answer #1
Sales 7225
Profits Sales-variable cost 9068
-Depreciation Cost of equipment/no. of years -553.470588
=Pretax cash flows 8514.529412
-taxes =(Pretax cash flows)*(1-tax) 5789.88
+Depreciation 553.4705882
=after tax operating cash flow 6343.35
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