A) The amount of initial cash flow at year 0=
Add Sale Proceeds of old machine = $55000
Add Tax on profit from sale of machine = $3500
Less Purchase of new machine = $130000
Initial cash flow = $78500
B) Incremental cash flows Year 1-5
Operational Expenses savings (1-35%) + Changes in depreciation*35%
Year 1= 45000-35% + (43329-9000)*35%
= 29250+12015 = $41265
Year 2= 45000-35% + (57785-9000)*35%
= 29250+17075 = $46325
Year 3= 45000-35% + (19253-9000)*35%
= 29250+3589 =$32839
Year 4= 45000-35% + (9633-9000)*35%
= 29250+222 = $29472
Year 5= 45000-35% + (0-9000)*35%
= 29250-3150
= $26100
C) NPV
Sum of discounted incremental cash flows= 35573+34427+21039+16277+12427 = $119743
NPV= PV of Cash Inflows- PV of cash outflows
= 119743-130000
= (10257)
The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $90,000. It had an...
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