A firm is evaluating a new machine to replace an existing, older machine. The old(existing) machine is
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Question:
A firm is evaluating a new machine to replace an existing, older machine. The old(existing) machine is being depreciated at 20,00 per year, whereas the new machine's depreciation will be 18,000. How will you evaluate depreciation in figuring the supplemental operating cash flows?
a. There should be no effect on the firm's cash flows, because depreciation is a non cash expense
b. Only the new machine depreciation of 18,000 will be used
c. Only the old depreciation of 20000 will be used
d. Only the change is depreciated will be evaluated
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