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    Net Cash Flow in first year

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    LISP Inc. is planning to purchase a new mixer for $50,000 that will qualify as MACRS 3-year property (first year depreciation rate = 33.33%). The new mixer should increase revenues by $20,000 per year with no increase in operating cost. If LISP's marginal tax rate is 40 percent, what is the net cash flow in the first year?

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    Solution Preview

    Net cash flow = Net Income + depreciation
    We calculate the net income
    Increase in ...

    Solution Summary

    The solution explains how to calculate the net cash flow in first year.