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 $ 573 and was bought Three (3) years ago (i.e. it has depreciated for three years). It could be sold today for $ 464 or sold in two years for $ 101 . The New machine would cost $ 548 and could be sold in two years for $ 328 . The new machine is more efficient than the old machine and would reduce waste, and therefore the cost of materials, by $ 344 per year. Due to the lower waste, we could also have a one-time reduction in inventory of 132 . The firm's tax rate is 43 %. Both machines are in the 4 year MACRS class, use these rounded depreciation amounts of 15%, 45%, 33% and 7% in your calculation. What are the total Operating Cash Flows in the first year (Year 1) with the new machine? Enter your answer to the nearest $.01. Do not use $ or , in your answer. Use a - sign if the cash flows are negative.
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