Consider the following for questions 4448:
A new product is being considered by Stanton Corp. An outlay of $40,000 is required for equipment and an additional net working capital investment of $1000 is required. The project is expected to have a 4 year life and the equipment will be depreciated on a straight line basis (equal annual amount) to a $4,000 book value.
Producing the new product will reduce current manufacturing expenses by $5,000 annually and increase earnings (revenue) before depreciation and taxes by $6,000 annually. Stanton's marginal tax rate is 40 percent. Stanton expects the equipment will have a market salvage value of $10,000 at the end of 4 years.
Question: Regardless of your answer to number 45 above, ASSUME DEPRECIATION = $8,000 per year. What is the project's aftertax operating cash flow during years 14 from the machine?
- 11,000
- 3,000
- 6,600
- 14,600
- 9,800