Author Question: The Mountain Jam Company purchased a machine 5 years ago for $70,000. It has an estimated life of 7 ... (Read 44 times)

jho37 · **on:** Apr 25, 2021

The Mountain Jam Company purchased a machine 5 years ago for $70,000. It has an estimated life of 7 years from the time of purchase and is expected to have zero salvage value at the end of 7th year. The old machine can be sold today for $60,000. A new machine can be purchased for $69,300. It has a 2-year life and is expected to reduce operating expenses by $50,000 per year. Sales aren't expected to change. After 2 years, the new machine can be sold for $20,000. The company uses the straight-line method to calculate depreciation for both machines. The tax rate is 40%. What are the terminal year cash flows?
◦ $12,000
◦ $27,860
◦ $39,860
◦ $51,860
◦ $59,860

hugthug12 · **Reply #1 on:** Apr 25, 2021

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