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Duddy Kravitz owns the Saint Viateur Bagel store. His world famous bagels are hand rolled, boiled and then baked in a wood - burning oven.

Duddy Kravitz owns the Saint Viateur Bagel store. His world famous bagels are hand rolled, boiled and then baked in a wood-burning oven. Uncle Benjy thinks that the wood oven should be replaced by a modern gas oven, which would reduce costs by $0.02 per bagel. Duddy is considering Uncle Benjy's idea. Last week, Duddy hired a plumber (for $500) to explore the feasibility of running a gas pipe into the store. The current oven was purchased thirty years ago for $20,000. It could be sold today for $5,000 and will be worth $3,000 in two years. A new oven costs $105,000 today and could be sold for $55,000 in two years. Assume that investment cash flows occur immediately, and that sales and production costs occur at the end of the year. The tax rate is 35%. What is the incremental initial cash flow for the project if he replaces the oven?

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