Calculate the change in operating cash flow for a firm for each year using the following information:
• The asset costs $1,000,000 and is depreciated using MACRS for a 3-year asset. • The machine will reduce operating expenses by $120,000 per year for three years. • The tax rate is 45%.
Working capital needs decrease by $10,000 when the machine is placed in service and are increased at the end of the life of the machine. • The asset can be sold for $400,000 at the end of three years.
