Riverdale Manufacturing is evaluating a new automated assembly system. If implemented, the system will reduce labor costs by $120,000 per year but will increase maintenance expenses by $45,000 annually. The equipment costs $350,000 and will be depreciated using straight-line depreciation over 8 years. Working capital requirements will increase by $15,000. The company's tax rate is 30%. Calculate the firm's annual cash flows associated with the new project.

Riverdale Manufacturing is evaluating a new automated assembly system. If implemented, the system will reduce labor costs by $120,000 per year but will increase maintenance expenses by $45,000 annually. The equipment costs $350,000 and will be depreciated using straight-line depreciation over 8 years. Working capital requirements will increase by $15,000. The company's tax rate is 30%. Calculate the firm's annual cash flows associated with the new project.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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