Question
I have the answer but I need it worked out please.
Crighton Industries is considering the purchase of a new machine that will cost $250,000, plus an additional $ 10,000 to ship and install. The new machine will have a 5-year useful life and will be depreciated to zero using the straight-line method. The machine is expected to have a salwage value of $30,000 at the end of year five. Crighton's income tax rate is 40%. The additional net working capital from this project of $50,000 is expected to return to its pre-project level upon termination. What is the non-operating terminal cash flow of the machine? -$32,000 $48,000 $68,000 $80,000
Explanation / Answer
Salvage Value * (1-t) = 30,000 * ( 1-0.4) = 18,000
Net Working Capital = 50,000
Total = 18,000 + 50,000 = 68,000