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Your firm has a marginal tax rate of 40 percent. You are considering replacing a piece of machinery that has a remaining useful life of
Your firm has a marginal tax rate of 40 percent. You are considering replacing a piece of machinery that has a remaining useful life of 10 years and is being depreciated at $140,000 per year. The replacement machine also has a life of 10 years and it would be depreciated at $160,000 per year. If all other costs of operating the two machines are identical, is there any ongoing cash flow consequence of the replacement? If so, what is the annual operating cash flow?
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