Team members involved in the target costing process should consider the current and future effects of their proposed solutions to arrive at the proposed target cost. Assume in the Boards and More example illustrated in Exhibit 19-8 that one proposed solution is to acquire new heating and drying equipment for the new paperboard mix. Assume the new equipment has a purchase price of $500,000 and is expected to increase the annual depreciation expense from $100,000 to $150,000 per year. What are the cash flow consequences to paperboard in the current year? In future years?
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