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djyliett [7]
2 years ago
7

A $63,000 machine with a 7-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with

a new machine costing $75,000, with a 5-year class life. The new machine will not increase sales, but will decrease operating costs by $16,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the initial outlay for the project?.
Business
1 answer:
Free_Kalibri [48]2 years ago
4 0

The incremental annual cash flow associated with the project is $12400

<h3>What is incremental annual?</h3>

Sales resulting from a higher volume of sales are known as incremental revenue. Establishing a baseline revenue level and comparing changes from that point onwards is required to calculate incremental revenue.

<h3>According to the given information :</h3>

Depreciation=[($63,000/7 years)-($75,000/5 years)

Depreciation=$9000-$15000

Depreciation=$6000

Now let calculate the Incremental annual cash flow

Incremental annual cash flow

={($16000-$6000) - [($16000-$6000)*34%]+$6000}

= {(10000)- [10000*34%]+6000}

= {(10000) - 3600+6000}

= {16000-3600}

= $12400

Incremental annual cash flow=$12400

Therefore the incremental annual cash flow associated with the project is $12400

To know more about the incremental annual visit:

brainly.com/question/22784283

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<h3>What is an overstatement?</h3>

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Questions about the tax multiplier:
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Answer:

1. The tax multiplier for this nation is -2.33

2. The tax multiplier for this nation if a $150 increase in taxes reduces real GDP by $450 would be -3

3. Real GDP change will be of -$1,800 if the tax multiplier is-9 and taxes are reduced by $200

Explanation:

1. In order to calculate the tax multiplier for this nation according to the given data we would have to calculate the following formula:

tax multiplier for this nation=-MPC/1-MPC

tax multiplier for this nation=-0.7/1-0.7

tax multiplier for this nation=-2.33

The tax multiplier for this nation is -2.33

2. To calculate the tax multiplier for this nation if a $150 increase in taxes reduces real GDP by $450 we would have to make the following calculation:

tax multiplier for this nation=real GDP/increase in taxes

tax multiplier for this nation=-$450/$150

tax multiplier for this nation=-3

The tax multiplier for this nation if a $150 increase in taxes reduces real GDP by $450 would be -3

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tax multiplier=real GDP/increase in taxes

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