Question
Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used
Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine originally cost $ 485 and was bought 3 years ago (i.e. it has depreciated for three years). It could be sold today for $ 254 or sold in two years for $ 173 . The New machine would cost $ 821 and could be sold in two years for $ 429. The new machine is more efficient than the old machine and would reduce waste, and therefore the cost of materials, by $160 per year. Due to the lower waste, we could also have a one-time reduction in inventory of $26. The firm's tax rate is 29%. Both machines are in the 3 year MACRS class, with depreciation amounts of 15%, 45%, 33% and 7%. What are the Operating Cash Flows in the first year (Year 1) with the new machine? Show your answer to the nearest dollar. Do not use the $ symbol in your answer. Use commas to separate thousands. Your Answer: Question 13 options: Answer
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