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Youngstown is considering an investment which will require the purchase of a machine. The machine costs $ 7 5 0 , 0 0 0 ,

Youngstown is considering an investment which will require the purchase of a machine. The machine costs $750,000, has a class life of 5 years, and will be depreciated using simplified straight-line depreciation. The firm's marginal tax rate is 35%. The incremental revenues expected over the 5-year life of the project are $210,000 per year, and cash expenses are $100,000 per year. In addition, the new machine will reduce defects by $15,000 per year. The new machine will require a one-time increase in net working capital of $25,000 at the time of installation. At the end of 5 years, the machine will be worthless, and the firm will not replace it. Calculate the annual cash flow resulting from this project in year 1. a) $76,250b) $89,250c) $110,250d) $129,600e) $133,750

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