rm is contemplating replacing its 2-year old copier with a new one which is faster and easier to operate. The old machine was to be depreciated over 3 years using straight line depreciation. Its original installation cost was $12,000. The old machine has been in use for 2 years, and it can be traded in for $2,500, and the firm will have a tax savings of $600. The new machine will cost $18,000 and it will also be depreciated over 3 years using the straight line method. It is not expected to have a residual value. Net working capital will decrease because supply levels can be reduced by $1,000. While the new machine is not expected to affect revenues, it will result in labor savings of $5,000 per year due to its greater speed. Reducing training expenses are expected to save an additional $1,500 per year. The firm is in the 40% tax bracket. What will the terminal cash flow?
A firm is contemplating replacing its 2-year old copier with a new one which is faster and easier to operate. The old machine was to be
The new machine will cost $18,000 and it will also be depreciated over 3 years using the
What will the terminal
$4,700
-$1,000
-$5,300
$5,300
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
