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What are annual incremental cash flows of buying new printer

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Printing Services is considering replacing its old printer with a new one. The old printer is expected to provide year-end cash inflows of £5,000 in each of the next 3 years before it fails. The new printer costs a significant £20,000 to buy and will last for 4 years. However, it is much more efficient than the old printer and is expected to provide year-end annual cash inflows of £10,000 (i.e., in each year of its life).

Question 1: What are the annual incremental cash flows of buying the new printer?

Question 2: Assuming a discount rate of 12%, should the firm replace the old printer now?

Reference no: EM132531695

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