Find out cash flows associated with this decision

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ABC and Co. is considering a proposal to replace one of its plants costing 60,000 and having a written down value of 24,000. The remaining economic life of the plant is 4 years after which it will have no salvage value. However, if sold today, it has a salvage value of 20,000. The new machine costing 130,000 is also expected to have a life of 4 years with a scrap value of 18,000. The new machine, due to its technological superiority, is expected to contribute additional annual benefit (before depreciation and tax) of 60,000. Find out the cash flows associated with this decision given that the tax rate applicable to the firm is 40%. (The capital gain or loss may be taken as not subject to tax).

Reference no: EM133239664

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