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Glaze Manufacturing Company is considering an opportunity to invest in a new piece of equipment. The equipment cost $62,000 with $42,000 due on the date of purchase and the remaining $20,000 due at the end of year three. The equipment is expected to have a 5 year useful life. GMC's accountant has developed the following cash flow information regarding the equipment.
Purchase price of the euipment due up front $42,000Remaining balance due at the end of year three $20,000Additional working capital required immedicately upon purchase $6,200Salvage Value $16,000Incremental income per year $21,000Working capital recovery at the end of useful life $6,200
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