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The Big Batting Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has

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The Big Batting Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $400,000 and a remaining useful life of 5 years. The fim does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $200,000. The old machines being depreciated by $120.000 per year using the straight line method The new machine has a purchase price of $1,200,000, an estimated useful life and MACRS ces We of years, and an estimated salvage value of $130,000. The applicable depreciation rates are 20%22194.12% 11%, and on. It is expected to economise on electric power usage labor and reports, as well as to reduce the number of defective bottles. In total, an annual savings of $220,000 will be restod f the new machine is installed. The company's marginal tax rate is 35%, and th has a 12% WACC. What in tal cash outlay is required for the new machine? Round your answer to the nearest dolor. Aegative amount should be indicated by a minus sign $ Calculate the annual depreciation allowance for both machines and compute the change in the wual depreciation expense the replacement is made. Round your answers to the nearest dollar Year Depreciation Depreciation Change in Allowance. Allowance. Old Depreciation New 1 $ 2 4 5 c. What are the incremental net cash flows in Years through 57 Round your aver to the rest dollar Year 1 Year 2 Year Years Year 4 5 d. Should their purchase the new machine? Support your are the input in the box below will not be graded but may be reviewed and considered by your instructor In general hold each of the following factors affect the investment decision and how should each be treated 1. The expected of the existing machine decreases The routin the box below will not be graded, but may be reviewed and considered by your instructor cassie et 5 years, and an estimated salvage value of $130,000. The applicable depreciation rates are 20% 11, and it is expected to economize on electric power usage, labor and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $220.000 will be realize installed. The company's marginal tax rate is 35%, and it has a 12% WACC. 2. What intial cash outlay is required for the new machine Round your answer to the nearest dollar. Negative amount should be indicated by a minus sign. Calculate the annual depreciation allowances for both machines and compute the change in the anual depreciation expense the replacement is made. Round your answers to the nearest Year Depreciation Depreciation Change in Allowance Allowance Old Depreciation New 1 $ $ 2 3 4 5 What are the incremental net cash flows in Years I though 57 Round your answers to the nearest dollar Year 1 Year 2 Year 3 Year 4 Year 5 5 c. Should the firm purchase the new machine Support your ans The input in the box below will not be graded but may be reviewed and considered by your instructor . In general how would each of the following factors affect the investment decision and how should each be treated 1. The expected of the existing machine deres The input in the box below will not be graded but may be reviewed and considered by your instructor

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