The Wall, Co. is considering the purchase of some new machinery. The new machinery costs...

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Accounting

The Wall, Co. is considering the purchase of some new machinery. The new machinery costs $90,000. The machinery falls into the MACRS three-year class, and it will be sold after three years for $9,000. The depreciation percentages each year are: Year 1=33%, Year 2=45%, Year 3=15%, Year 4=7%. The machinery will require The Wall to increase its working capital by $5,500 which will be recovered at the end of the machinery's life. The machinery has a three year life and will increase The Wall's revenues by $150,000 and costs by $25,000 for each year of the project's three year life. The Wall has a 10% cost of capital and has a 20% tax rate.
What is the operating cash flow in year 2 for the project?
Multiple Choice
$90,000
$100,000
$108,100
$105,940

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