What is the incremental free cash flow for year one

Reference no: EM13268260

Your company is considering the replacement of an old machine with a new one that is more efficient. The old machine cost $50,000 when it was purchased 9 years ago. The old machine is being depreciated using the simplified straight-line method over a useful life of 10 years. The old machine could be sold today for $4000. The new machine has an invoice price of $75,000, and it will cost $5000 for shipping and $20000 to modify and install the machine. Cost savings from use of the new machine are expected to be $25000 per year for 5 years, at which time the machine will be worn out and sold for its estimated scarp of value of $5000. The new machine will be depreciated using the simplified straight-line method over its 5 year useful life, resulting in expected to increase by $10000 at the inception of the project, but this amount will be recaptured at the end of year five. What is the incremental free cash flow for year one?

Reference no: EM13268260

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