Sumami Ink considers replacing its old machine. The old machine’s current market value is $2 million and its current book value is $1 million. If not sold, it will have a market value at the end of 5 years of $200,000 and a book value of zero. A replacement new machine costs $3 million, and at the end of the five years it will have a market value of $500,000, and will be fully depreciated by the straight‐line method. Assume that the asset class will be closed, and the corporate tax rate is 34%. What is the total investment cash flow in year 0 and the total investment cash flow by the end of year 5? Multiple Choice -$1000K & $198K respectively. -$3000k & $500k respectively. -$1000K & $300K respectively. -$1,340k & $300k respectively. -$1,340k & $198k respectively. -$5000k & $700k respectively.
Sumami Ink considers replacing its old machine. The old machine’s current market value is $2 million and its current book value is $1 million. If not sold, it will have a market value at the end of 5 years of $200,000 and a book value of zero. A replacement new machine costs $3 million, and at the end of the five years it will have a market value of $500,000, and will be fully depreciated by the straight‐line method. Assume that the asset class will be closed, and the corporate tax rate is 34%. What is the total investment cash flow in year 0 and the total investment cash flow by the end of year 5?
Multiple Choice
-$1000K & $198K respectively.
-$3000k & $500k respectively.
-$1000K & $300K respectively.
-$1,340k & $300k respectively.
-$1,340k & $198k respectively.
-$5000k & $700k respectively.
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