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Company B is contemplating the purchase of a more advanced extrusion machine to replace the machine currently being used in its production process. The firm

Company B is contemplating the purchase of a more advanced extrusion machine to replace the machine currently being used in its production process. The firms production engineers contend that the newer machine will turn out the current volume of output more efficiently. They note the following facts in support of their contention. The old machine can be used for five more years. It has a current salvage value $14,000, but if held to the end of its useful life, the old machine would have an estimated final salvage value of $2,000. The existing machine still has a book value of $7,500.00 with two more years of SL depreciation, and the amount of depreciation is $3,750 each year. The new, advanced extrusion machine costs $70,000. Its final salvage value is projected to be $10,000 at the end of its five-year useful life. The new machine falls into the three-year property category for MACRS depreciation. The new machine will reduce labor and maintenance usage by $15,000 annually. Income taxes on incremental profits are paid at a 30% rate. Part A If the old machine is disposed now, how much ATCF could Company B receive? B What is the incremental ATCF for years 1? What is the incremental ATCF for years 2? D What is the incremental ATCF for years 3? What is the incremental ATCF for years 4?F What is the incremental ATCF for years 5?

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