What is the annual cash flow for years 1 through 5

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Atlantic Control Company purchased a machine 2 years ago at a cost of $70,000. The machine is being depreciated using simplified straight-line over its 7-year class life. The machine would have no salvage value at the end of year 7, but could be sold now for $40,000. A new replacement machine can be purchased for $80,000. The new machine would be depreciated over 5 years. Rapidly changing technology has necessitated this project. Delivery and installation charges will amount to $10,000 and net working capital investment of $5,000 will be required at installation. The new machine will not increase sales, but will reduce operating costs by $20,000 per year. The firm's tax rate is 21%.

What is the annual cash flow for years 1 through 5?.

a) $17,480

d) $19,650

b) $19,300

e) $16,500

c) $18,600

Reference no: EM132070059

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