Question
Mom's cookies inc isconsidering the purchase of a new cookie oven. The original costs of the old oven was $31,000 it is now 5 years
Mom's cookies inc isconsidering the purchase of a new cookie oven. The original costs of the old oven was $31,000 it is now 5 years old and has a current market value of $13,000. The old oven is being depreciated over a 10 year life towards a zero estimatd salvge value of $15,500 and an annual depreciation expense of $3,100. The old oven can be used for 6 years but nomarket value after itsdepreciable life is over. Management is considering the purchase of a new oven who's cost is $26,000 and whose estimated salvage value is zero. Expected before tax cash savings fromthe new oven is $4,100 a year over the full MACRS depreciable lfe. Depreciation is computed using MACRS over a 5 year life.and the cost of capital is 10%. Assume a 35%tax ratehis project? What will the cash flows be for this project? FCF $_) $___!0 $___1$_2 $_3$_____4 $_________5 $_____6 $_______________
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