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ABCD, LLC has a flange-lipping machine that was purchased 5…

Posted byAnonymous July 4, 2026

Questions

ABCD, LLC hаs а flаnge-lipping machine that was purchased 5 years agо fоr $60,000. It had an expected life оf 10 years when it was bought, and its remaining depreciation is $6,000 per year for each year of its remaining life. As older flange-lippers are robust and useful machines, this one can be sold for $20,000 at the end of its useful life. A new high-efficiency, digital-controlled flange-lipper can be purchased for $160,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $40,000 per year, although it will not affect sales. The new equipment will have zero salvage value. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life, so the applicable depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41% (There will be no depreciation in its fifth year since it will already be fully depreciated.). The old machine can be sold today for $45,000. The firm's tax rate is 25%, and the appropriate cost of capital is 14%. If the new flange-lipper is purchased, what is the amount of the initial cash flow at Year 0? Round your answer to the nearest dollar. Cash outflow, if any, should be indicated by a minus sign. Do not enter $ or % signs.  Note: all data in the problem may not be needed.  You are only finding the initial cash flow at t = 0. 

Tags: Accounting, Basic, qmb,

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