Compute the after-tax cash flow

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Question - Your company is considering replacing an old steel cutting machine with a new one. Two months ago, you sent the company engineer to a training seminar demonstrating the new machine's operation and efficiency. The $2,500 cost for this training session has already been paid. If the new machine is purchased, it would require $5,000 in installation and modification costs to make it suitable for operation in your factory. The old machine originally cost $50,000 five years ago and is being depreciated by $7,000 per year. The new machine will cost $75,000 before installation and modification. It will be depreciated by $5,000 per year. The old machine can be sold today for $15,000. The marginal tax rate for the firm is 40%. Compute the after-tax cash flow if you buy and use the new machine and sell the old machine today.

Reference no: EM132918084

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