What is the new initial investment for the new machine

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Reference no: EM131914368

Bulldog Inc. purchased a leather machine seven years ago. The cost of the machine was $11,200. It was expected to be used for 10 years. The machine has been depreciated on a straight-line basis with an estimated salvage value of s1.200. The machine can be sold for $3,500 today Bulldog is considering the purchase of a new leather-cutting machine to replace the existing machine. Having the new machine will result in an increase of revenue of$13,000, but the operating costs will also increase by $6,000 for three years. The new machine costs $14,000, with an expected salvage value of $2,000 at the end of the third year. The new machine will be depreciated using the MACRS method, and is considered a three-year property. There will be an increase of $1,600 in net working capital. Gorilla's tax rate is 40%, and cost of capital is 16%. E. What is the new initial investment for the new machine? F. The expected after-tax value salvage of the new machine is $1,620. Compute the expected new cash flow at the end of year 3.

Reference no: EM131914368

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