Considering replacing an existing machine

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Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $154,000 per year for 5 years. Depreciation on the new machine is $128,000 compared with $29,000 on the old machine. In addition, inventory will increase from $250,000 to $414,000 until the end of the project. The tax rate is 30%. What is the relevant cash flow in year 2?

Reference no: EM131358154

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Considering replacing an existing machine : Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $154,000 per year for 5 years. Depreciation on the new machine is $128,000 compared with $29,000 on the old machine. In addition, inventory w..

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