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I need the answer as soon as possible The new piece of equipment will have a cost of $9,000,000, and it will be depreciated on
I need the answer as soon as possible
The new piece of equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of five years The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year O) and three more years of depreciation left ($50,000 per year). The new equipment will have a salvage value of so at the end of the project's life (year 5). The old machine has a current salvage value (at year 0) of $300,000. Replacing the old machine will require an investment in net working capital (NWC) of $50,000 that will be recovered at the end of the project's life (year 5). The new machine is more efficient, so the incremental increase in operating income before taxes will increase by a total of $700,000 in each of the next five years (years 1-5). (Hint: This value represents the difference between the revenues and operating costs (including depreciation expense) generated using the new equipment and that earned using the old equipment.) The project's required rate of return is 9% The company's annual tax rate is 30%. . m Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipStep by Step Solution
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