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The Munsell Colour 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 Colour 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 labour 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 are the operating cash flows at the end of Year 1?
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