Bella’s Beer Company (BBC) is considering replacing its existing bottling machine with a new bottling machine. Debt repayments associated with the new machine are $12,000 per annum. The existing bottling machine has a current market value of $20,000. Depreciation expense associated with the existing bottling machine is $10,000 per annum. The existing machine has a remaining depreciable life of eight years at which time it will have zero book value. The new bottling machine costs $140,000 immediately. Internal management plan to depreciate the new machine using a ten-year effective life. The new machine is more efficient and will cause BBC’s yearly operating cash outflows to decrease by $45,000 from the current yearly figure of $150,000. The new bottling machine will result in BBC’s total annual sales increasing from $220,000 to $300,000. The tax office prescribes that the new bottling machine has an effective life of eight years. Assume the company tax rate is 30%. What are the 'cash flows over the life'?
Calculating 'cash flows over the life'
Bella’s Beer Company (BBC) is considering replacing its existing bottling machine with a new bottling machine. Debt repayments associated with the new machine are $12,000 per annum.
The existing bottling machine has a current market value of $20,000. Depreciation expense associated with the existing bottling machine is $10,000 per annum. The existing machine has a remaining depreciable life of eight years at which time it will have zero book value.
The new bottling machine costs $140,000 immediately. Internal management plan to
The new bottling machine will result in BBC’s total annual sales increasing from $220,000 to $300,000. The tax office prescribes that the new bottling machine has an effective life of eight years. Assume the company tax rate is 30%.
What are the 'cash flows over the life'?
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