RM, just one mistake. On the OCF you ADD the $10,000 tax savings rather than deduct them and the OCF is therefore $63,000 for the first year.

Ann A. Nicole Industries is considering the purchase of a new machine that will cost $152,000, plus an additional $8,000 to ship and install. The new machine will have a 5-year useful life and will be depreciated to its expected salvage value of $20,000 using the straight-line method. The machine is expected to generate new sales of $65,000 per year and is expected to increase labor and electrical expenses by $12,000 annually. Ann's income tax rate is 40%. What is the projected cash flow of the machine for year 1?

I figured this problem out using:

EBIT = 65000-12000-(160000-20000/5)= 25000

Tax = .40 x 25000 = 10000

OCF = 25000 - 10000 + 28,000 = 43000

I just want to double check that I am using the right formula for this problem before I move onto more difficult problems :)