Question
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,300 and sell its old washer
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $6,300 and sell its old washer for $2,100. The new washer will last for 6 years and save $1,300 a year in expenses. The opportunity cost of capital is 12%, and the firm's tax rate is 40%.
If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life, what is the annual operating cash flow of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated.
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