You purchased a machine five years ago for $100,000. It has a useful life of ten years and you have depreciated it using straight line depreciation. It has a current selling price of $15,000. You would like to purchase a new machine which would cost $120,000. It costs $4000 to install and $4,000 to ship the machine. The new machine has a useful life of five years. The new machine would require you to maintain additional inventory of $10,000. If the company is in the 25% marginal tax bracket, calculate the initial investment.

As noted in the problem above the new machine has a useful life of 5 years, with a salvage value at the end of the machines life of $20,000. The old machine produced revenue of $17,000, whereas the new machine is expected to generate revenue of $52,000. Expenses associated with the old machine were $8,000, whereas expenses for the new machine are expected to be $20,000.

Assuming that the firm is in the 25% marginal tax bracket, estimate the yearly cash-flows associated with the new machine