Considering the replacement of machine

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You are considering the replacement of a machine which has a current book value of $55,000 and market value of $62,000. The machine is expected to last another 4 years, at which time it could be sold for its book value of $15,000. Depreciation is $10,000 per year. The new machine will cost $100,000 and will last four years, at which time it can be sold for $30,000. The machine is in the 3-years MACRS class (rates are .33, .45, .15, .07). The new machine will not change sales but will reduce operating expenses by $50,000 each year. The firms tax rate is 40%. The new machine will also require an increase in net working capital of $4,000. Show the cash flows for each year.

Reference no: EM131500952

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