i cant figure out the initial investment cash outflow

The Damon Corporation Calculation of the Initial Investment $ 155,000 15.000 $ 170,000 Installed cost of proposed machine Cost of proposed machine plus: Installation costs Total installed cost - proposed (depreciable value) After-tax proceeds from sale of present machine Proceeds from sale of present machine less: Tax on sale of present machine Total after-tax proceeds - present 70,000 (10,125) $ 59,875 $ 18,000 Change in net working Capital Initial investment Cash Outflow (92125 $ 125,000 $ Tax on sale of old machine Cost of old machine MACRS 20% from depr sched 32% 19% Book Value Change in Working Capital Increase in receivables increase in inventory increase in payables Net working capital year 1 year 2 year 3 15,000 19,000 16.000 18,000 25,000 40,000 23.750 36,250 $ $ $ 70,000 Sale price of old machine Gain on sale Tax rate Tax Expense $ 33.750 30% 10.125 1 $ Damon Corporation, a sports equipment manufacturer, has a machine currently in use that was originally purchased 3 years ago for $125,000. The firm depreciates the machine under MACRS using a 5-year recovery period. Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine will be $70,000. Damon can buy a new machine for a net price of $170,000 (including installation costs of $15,000) The proposed machine will be depreciated under MACRS using a 5-year recovery period. If the firm acquires the new machine its working capital needs will change: Accounts receivable will increase $15,000, inventory will increase $19,000, and accounts payable will increase $ 16,000. Earnings before depreciation, interest, and taxes (EBDIT) for the present machine are expected to be $95,000 for each of the successive 5 years. For the proposed machine, the expected EBDIT for each of the next 5 years are $105,000, $110,000, $120,000, $120,000, and $120,000, respectively. The corporate tax rate (T) for the firm is 40% (Table 4.2 on page 120 contains the applicable MACRS depreciation percentages.) Damon expects to be able to liquidate the proposed machine at the end of its 5 year usable life for $24,000 (after paying removal and cleanup costs). The present machine is expected to net $8,000 upon liquidation at the end of same period. Damon expects to recover its net working capital investment upon termination of the project. The firm is subject to a tax rate of 30%. 3 7 3 9 0 1 2 23