Capital budgeting decision

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Timmy Choo, a French shoe producer, is considering replacing an old machine for a new one that produces more stilettos at lower costs. Explain for each of these 6 items whether they should or should not be included inyour capital budgeting decision, and the sign of these cash flows if you do include them:

a) Advertising costs in order to promote the brand.

b) The after-tax salvage value of the old machine.

c)Interest payments that must be paid on the bank loan to finance the new machine.

d) Overhead costs that are allocated to this new machine, although the aggregate overhead expense of the firm is unaffected.

e) The incremental depreciation expense of the new machine.

f) Cost savings as a result of purchasing the new machine.

Reference no: EM133004977

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