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A company is considering the purchase of a new machine. The machine will cost $60,000 plus $25,000 for shipping and installation and falls under the
A company is considering the purchase of a new machine. The machine will cost $60,000 plus $25,000 for shipping and installation and falls under the 3-year MACRS class. Net Working Capital will rise by $6,000 initially. It is forecasted that revenues will increase by $150,000 for each of the next 4 years and the machine will then be sold (scrapped) for $5,000 at the end of the fourth year, when the project ends. Operating costs will rise by $80,000 for each of the next four years. The company is in the 40% tax bracket. Calculate the relevant incremental cash flows for this investment including initial cash outflow, operating cash flows and terminal cash flow
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