For this question, start fresh, do not carry over data from earlier questions. You are analyzing the prospects of installing cost saving machinery. You have the following information:
- On a yearly basis the machinery generated a savings of $38,000 which led to an increase in taxes of $4,400. The space used by the machinery was lost, leading to loss of rent (post tax) of $8,000.
Hint:Here you don’t need to know Depreciation (which is needed for calculating taxes) or the tax rate. You are told what the taxes are.
What will be the net increase in cash flows per year from installing the machinery?