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A company is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will decrease by $680,000
A company is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will decrease by $680,000 per year. However, other cash operating expenses will increase by $165,000 per year. The equipment will cost $173,000 and is depreciable over 12 years using simplified straight lines to a zero salvage value. Crossroad will invest $47,000 in net working capital at installation. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows associated with the new project.
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