Question
The Flemingo Inc. purchased a special machine 1 year ago at a cost of $12,000. At the time of purchase the machine was estimated to
The Flemingo Inc. purchased a special machine 1 year ago at a cost of $12,000. At the time of purchase the machine was estimated to have a useful life of 6 years and no salvage value. The annual cash operating cost is approximately $20,000. A new machine has just come on the market which will do the same job but with an annual cash operating cost of only $17,000. This new machine costs $21,000 and has an estimated life of 5 years with zero salvage value. The old machine can be sold for $10,000 to a scrap dealer. Straight line depreciation is used, and the companys income tax rate is 40 percent.
Assuming a cost of capital of 8 percent after taxes,
calculate (c) The incremental cash inflow after tax
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