Intro

BKM Industries spent $$10,000$ on a feasibility study to expand its production

capacity. The company decided to go ahead with the expansion: It will need to buy

a new machine for $$53,000$ and spend $$8,000$ on installing it$.$ The machine will be

depreciated linearly to zero over a $5-$year period and it will have no salvage value.

The machine will create $$87,000$ in incremental revenues per year and $$60,900$ in

incremental costs per year. The company's marginal tax rate is $34\%.$

Part $1$

What is the incremental incremental cash flow associated with the expansion in

year $0($initial investment$)?$

Part $2$

What is the incremental incremental cash flow associated with the expansion in

year $1?$