Computing operating cash flows in first year

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Reference no: EM1337429

Your company plans to produce a product for two more years and then to shut down production. You are considering replacing an old machine used in production with a new machine. The Old machine originally cost $552 and was bought Three (3) years ago (i.e. it has depreciated for three years). It could be sold today for $330 or sold in two years for $66. The New machine would cost $556 and could be sold in two years for $227. The new machine is more efficient than the old machine and would reduce waste, and therefore the cost of materials, by $179 per year. Due to the lower waste, we could also have a one-time reduction in inventory of 17. The firm's tax rate is 41%. Both machines are in the 4 year MACRS class, with depreciation amounts of 15%, 45%, 33% and 7%. What are the Operating Cash Flows in the first year (Year 1) with the new machine?

Reference no: EM1337429

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