New machine is expected to reduce labor costs

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Reference no: EM131357407

Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $127,000 per year for 5 years. Depreciation on the new machine is $57,000 compared with $34,000 on the old machine. In addition, inventory will increase from $250,000 to $274,000 until the end of the project. The tax rate is 30%. What is the relevant cash flow in year 2?

Reference no: EM131357407

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