Loxahatchee Corporation is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will fall by $155,000 per year. However, other cash operating expenses will increase by $85,000 per year. The equipment will cost $240,000 and is depreciable over 10 years using a simplified straight line. Networking capital is $8,000 and the marginal tax rate is 34%. Calculate the firm's annual cash flows associated with the new project.
Loxahatchee Corporation is trying to decide whether to invest to automate a production line. If the project is accepted, labor costs will fall by $155,000 per year. However, other cash operating expenses will increase by $85,000 per year. The equipment will cost $240,000 and is depreciable over 10 years using a simplified straight line. Networking capital is $8,000 and the marginal tax rate is 34%. Calculate the firm's annual cash flows associated with the new project.
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 8P
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Question
Calculate the firm's annual

Transcribed Image Text:Loxahatchee Corporation is trying to decide whether to invest to automate a production line.
If the project is accepted, labor costs will fall by $155,000 per year. However, other cash
operating expenses will increase by $85,000 per year. The equipment will cost $240,000 and is
depreciable over 10 years using a simplified straight line. Networking capital is $8,000 and the
marginal tax rate is 34%.
Calculate the firm's annual cash flows associated with the new project.
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