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Your company is considering replacing an old steel cutting machine with a new one. Two years ago, you sent the company engineers and a marketing
Your company is considering replacing an old steel cutting machine with a new one. Two years ago, you sent the company engineers and a marketing manager to evaluate business opportunity feasibility study from the new machines operation and efficiency. The $ cost for this feasibility study has already been paid. If the new machine is purchased, it would require $ in installation and modification costs to make it suitable for operation in your factory. The old machine originally cost $ five years ago and is being depreciated by $ per year. The new machine will cost $
before installation and modification. The old machine can be sold today for $ The marginal tax rate for the firm is
a What is the aftertax cash flows from selling the old machine?
b Compute the relevant initial outlay in this capital budgeting decision netting out money from selling old machine
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