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Citrus2011 [14]
2 years ago
6

Stanton Inc. is considering the purchase of a new machine that will reduce manufacturing costs by $5,000 annually and increase e

arnings before depreciation and taxes by $6,000 annually. Stanton will use the Modified Accelerated Cost Recovery System (MACRS) method to depreciate the machine, and it has estimated the depreciation expense for the first year as $8,000. What is the supplemental operating cash flow for the first year?
Business
1 answer:
iris [78.8K]2 years ago
6 0

Answer:

$9,800

Explanation:

The computation of the supplemental operating cash flow for the first year is shown below:-

For computing the supplemental operating cash flow for the first year first we need to follow some steps to reach the answer which is here below:-

Total Inflows = Annual savings in cost + Increase in earning

= $5,000 + $6,000

= $11,000

Earnings before tax = Total Inflows - Depreciation

= $11,000 - $8,000

= $3,000

Tax = Earnings before tax × 40%

= $3,000 × 40%

= $1,200

Earning after tax = Earnings before tax - Tax

= $3,000 - $1,200

= $1,800

Cash flow in year 1 = Earning after tax + Depreciation

= $1,800 + $8,000

= $9,800

So, for computing the cash flow in year 1 we simply added earning after tax with depreciation.

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Suppose Russia and Sweden each produce only paper and cars. Russia can produce 8 tons of paper or 4 million cars each year. Swed
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Attached grap with point A and B.

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8 0
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Answer:

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