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The Munsell Color Company is considering the purchase of a new batch polymer-bonding machine for producing its number one line of crayons. Although the machine
The Munsell Color Company is considering the purchase of a new batch polymer-bonding machine for producing its number one line of crayons. Although the machine being considered will not produce any increase in sales revenues, it will result in the before-tax reduction of labor costs by $200,000 per year. The machine has a purchase price of $250,000, and it would cost an additional $10,000 to install the machine. In addition, to operate this machine, inventory must be increased by $15,000. The machine is categorized as 10-year property. After 2 years, it can be sold for $150,000. The tax rate is 34% and the cost of capital is 15%. What is the initial cash flow for the project? MACRS Depreciation Rates \begin{tabular}{r} $260,000 \\ $265,000 \\ $250,000 \\ \hline$275,000 \\ $285,000 \end{tabular}
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