Boric Company Is Considering the Purchase of a New Acid-Producing

Essay

Boric Company is considering the purchase of a new acid-producing machine. It will cost $360,000, and it will last for 12 years with a zero terminal salvage value at the end of that time.
The equipment is expected to increase revenues by $40,000 per year, but additional cash outlays to operate the equipment will equal $24,000 per year.
Required: Calculate the total annual net after-tax cash flow generated by using the machine. Use straight-line amortization and a tax rate of 25 percent.