What is the after-tax cash flow effect from deprecation of switching to the new food maker for EHC if the company’s tax rate is 30 percent and the correct discount rate is 12 percent?

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What is the after-tax cash flow effect from deprecation of switching to the new food maker for EHC if the company’s tax rate is 30 percent and the correct discount rate is 12 percent?

Finance Basics

Emily Home Catering (EHC) is considering switching from its old food maker to a new Wonder Food Maker. Both food makers will remain useful for the next 10 years, but the new food maker will generate a depreciation expense of $5,000 per year, while the old food maker will generate a depreciation expense of $4,000 per year. What is the after-tax cash flow effect from deprecation of switching to the new food maker for EHC if the company’s tax rate is 30 percent and the correct discount rate is 12 percent?

 

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