Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your firm is replacing a manually-operated machine with a fully automated machine. The old machine was purchased 5 years ago, had an original depreciable value

Your firm is replacing a manually-operated machine with a fully automated machine. The old machine was purchased 5 years ago, had an original depreciable value of $140,000, and is depreciable using simplified straight-line for 10 years. The old machine has maintenance and defects costs totaling $9,000 per year. The current salvage value of the old machine is $12,000. The new machine costs $80,000 with shipping costs of $2,000. The new machine would be depreciated over 5 years using simplified straight line, and would have no salvage value after the fifth year. The new machine would have maintenance and defects costs totaling $4,000 per year. The tax rate is 21%. What is the annual cash flow for years 1 through 5 (not including the terminal cash flow) if the project is undertaken?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Foundations of Finance The Logic and Practice of Financial Management

Authors: Arthur J. Keown, John D. Martin, J. William Petty

8th edition

132994879, 978-0132994873

More Books

Students also viewed these Finance questions