14. Brownell Inc. currently has annual cash revenues of $240,000 and annual expe

Question

14. Brownell Inc. currently has annual cash revenues of $240,000 and annual expenses of $185,000. The expenses are all cash except for $35,000 of depreciation. The company is considering the purchase of a new mixing machine costing $120,000 that would increase cash revenues to $290,000 and expenses (including depreciation) to $205,000 in year two. The new machine would increase depreciation expense to $50,000 per year. The company's tax rate is 40%. Brownell's incremental after-tax cash flow from the new mixing machine in year two would be:

a. $33,000
b. $24,000
c. $30,000
d. $18,000

Explanation / Answer

Brownell's incremental after-tax cash flow from the new mixing machine in year two would be: a. $33,000 Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Existing New Machine Incremental Cash revenues               240,000.00         290,000.00            50,000.00 Annual expenses            (185,000.00)       (205,000.00)         (20,000.00) Income before Tax                 55,000.00            85,000.00            30,000.00 Less tax at 40%               (22,000.00)         (34,000.00)         (12,000.00) Income after Tax                 33,000.00            51,000.00            18,000.00 Add depreciation                 35,000.00            50,000.00            15,000.00 Cash flow after Tax                 68,000.00         101,000.00            33,000.00

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