Question

The Tinbergen Company is considering a new polishing machine. The existing polishing machine cost

$100,000 five years ago and is being depreciated using straight-line over a 10-year life. Tin-Bergen’s

management estimates that they can sell the old machine for $60,000. The new machine costs $150,000

and would be depreciated over five years using MACRS. At the end of the fifth year, Tinbergen’s

management expects to be able to sell the new polishing machine for $75,000. The marginal tax rate is

40%.

(a) What are the cash flows related to the acquisition of the new machine?

(b) What are the cash flows related to the disposition of the old machine?

(c) What are the cash flows related to the disposition of the new machine​

Answer 1

Explanation:

Answer

1 Cash flow related with acquisition of new machine will be $ 150000.

2 Cash flow disposition of old machine

Sale value 60000

book value

Machine cost 100000

Less depreciation for 5 years 50000