Bodacious Company Is Considering the Purchase of a New Machine

Multiple Choice

Bodacious Company is considering the purchase of a new machine for $80,000. The machine would generate an annual cash flow before depreciation and taxes of $28,778 for five years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12 percent. The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the annual net after-tax cash flow (rounded) ?

A) $23,667
B) $8,633
C) $6,400
D) $28,778