Regal Enterprises Is Considering the Purchase of a New Embroidering

Multiple Choice

Regal Enterprises is considering the purchase of a new embroidering machine. It is expected to generate additional sales of $400,000 per year. The machine will cost $295,000, plus $3,000 to install it. The embroiderer will save $12,000 in labor expense each year. Regal is in the 34% income tax bracket. The machine will be depreciated on a straight-line basis over five years (it has no salvage value) . The embroiderer will require annual operating expenses of $136,000. What is the annual operating cash flow that the machine will generate?

A) $316,954
B) $124,000
C) $202,424
D) $165,816