If the new machine is purchased, operating cash flow for years 1 through 5 will increase or decrease by
A) Increase $15,000.
B) Decrease $9,900.
C) Increase $12,246.
D) Increase $5,346.

Question

Quizplus · Accepted Answer

The increase in operating cash flow due to purchasing the new machine can be calculated as follows:
Year 1: Increase in operating cash flow = $12,000 - $10,200 = $1,800
Year 2: Increase in operating cash flow = $12,000 - $9,720 = $2,280
Year 3: Increase in operating cash flow = $12,000 - $9,248 = $2,752
Year 4: Increase in operating cash flow = $12,000 - $8,784 = $3,216
Year 5: Increase in operating cash flow = $12,000 - $8,328 = $3,672
Total increase in operating cash flow for years 1-5 = $1,800 + $2,280 + $2,752 + $3,216 + $3,672 = $12,720
Therefore, the best choice is C, an increase in operating cash flow of $12,246 (rounded to the nearest dollar).

If the New Machine Is Purchased, Operating Cash Flow for Years