suppose that the BMW plant in spartanburg, sc decides to replace a major assembly line on the plant floor. the current assembly line has a book value of $400,000 and the firm can sell it to another manufacturer for $200,000.

the new assembly line will cost BMW $4,000,000 to purchase, and there will be an additional $200,000 cost to deliver and install the asset. finally, as part of the new assembly line, BMW will increase NWC.

the marginal tax rate facing BMW is 30%. what is the cash flow from replacing the old assembly line? (include all costs)

$4065000

$3991000

$4019000

$3931000

$3804000

increase NWC by $125,000 today (year 0)