Youre evaluating proposed acquisition of new machining tool


You’re evaluating the proposed acquisition of a new machining tool for $88,000 by your company. The tool falls into the MACRS three-year class, and it will be fully depreciated after three years and sold at the time for $26,000. Use of the tool requires an increase in NWC (spare parts inventory) of $3,500. The tool will have no effect on revenues, but it’s expected to save the firm $24,000 per year in before-tax operating costs, mostly labor. The firm’s marginal tax rate is 38 percent. What will be the adjusted total cash flow (ATCF) from the sale of the machining tool?

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Financial Management: Youre evaluating proposed acquisition of new machining tool
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