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A factory is considering a six-year project to improve its production efficiency. Buying a new piece of equipment would cost $540,000. is expected to result
A factory is considering a six-year project to improve its production efficiency. Buying a new piece of equipment would cost $540,000. is expected to result in $130,000 in savings, per year, before taxes. This piece of equipment has a 10 -year economic life and it would follow the straight line depreciation method. Its salvage value at the end of the project is estimated at $110,000. The equipment also requires an immediate investment in spare parts inventory of $20,000. The company will require additional $500 in inventory in each succeeding year of the project. The company's tax rate is 28 percent. The appropriate discount rate is 9 percent. Calculate the annual Operating Cash Flow. HINT: You WILL NOT need to use all numbers given in this problem to answer this question! $92,250 $98,750$100,800$105,000 $108,720
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