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Problem:

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.

Requirement:

Question: What is the annual operating cash flow that the machine will generate?

Note: Explain in detail and show all computations in proper way.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167758

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