General Studies · Capital Budgeting
A company is replacing an old machine (Book Value = 0, Scrap Value = 20) with a new one costing 100. The new machine saves 40 per year in costs before tax. Its useful life is 5 years. The corporate tax rate is 30% and the company uses straight-line depreciation. Calculate: (1) The annual depreciation of the new machine. (2) The annual Cash Flow After Tax (CFAT). (3) The total cash flow in Year 5 if the salvage value of the new machine at the end of Year 5 is 10.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11. 18; 2. 34; 3. 54
- 21. 20; 2. 30; 3. 40
- 31. 18; 2. 33.4; 3. 43.4✓
- 41. 20; 2. 34; 3. 44
Correct answer
1. 18; 2. 33.4; 3. 43.4
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