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The Faversham Fish Farm is considering the introduction of a new fish-flaking facility. To launch the facility, it will need to spend $90,000 for special
- The Faversham Fish Farm is considering the introduction of a new fish-flaking facility. To launch the facility, it will need to spend $90,000 for special equipment. The equipment has a useful life of four years. Shipping and installation expenditures equal $10,000, and the machinery has an expected final salvage value, four years from now, of $16,500. The machinery is to be housed in an abandoned warehouse next to the main processing plant. The old warehouse has no alternative economic use. No additional net working capital is needed. The marketing department envisions that use of the new facility will generate additional net operating revenue cash flows, before consideration of depreciation and taxes, as follows:
1 2 3 4
Operating Revenue $35,167 $36,250 $55,725 $32,258
Assuming that the marginal tax rate equals 40 percent, calculate the projects relevant incremental cash flows.
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