Asked by
Jessica Cooper
on Dec 20, 2024
Verified
A new replacement machine is being considered that will save $105,000 per year in labor cost and $20,000 on maintenance. The company's marginal tax rate is 34%. The replacement will also generate a tax savings from depreciation of $5,000. Estimate the incremental cash flow for the first year associated with buying the new machine.
A) $87,500
B) $82,500
C) $42,500
D) $51,100
Marginal Tax Rate
The rate at which the next dollar of income will be taxed. Generally the taxpayer’s bracket rate.
Depreciation
The reduction in value of an asset over time, due in particular to wear and tear.
Labor Cost
Labor cost refers to the total expenditure incurred by an employer to compensate its employees, including wages, benefits, and taxes.
- Ascertain the factors of initial funding disbursements for fresh projects or replacement investments.
- Discern the impact that taxes and depreciation have on the financial movement related to project endeavors.
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Learning Objectives
- Ascertain the factors of initial funding disbursements for fresh projects or replacement investments.
- Discern the impact that taxes and depreciation have on the financial movement related to project endeavors.