Peaches Inc. is considering the purchase of a new machine for $140,000. The machine will generate an annual cash flow before depreciation and taxes of $52,688 for four years. At the end of four years, the machine will not have a salvage value. The company's rate of return is 10 percent, with a tax rate of 21%. What is the net after-tax cash flow per year?

Question

Quizplus · Accepted Answer

($52,688 x (1 - .21)) + (($140,000 ÷ 4) x .21) = $48,974
(ann. Cash flows x (1 - tax rate)) + ((cost ÷ life) x tax rate)