What is the incremental cash flow of replacement project

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A firm is considering replacing its computer system with a new one. The new system is expected to have an annual operational cost savings of $58,985. The initial cost is $169,850 and the computer system will last for 6 years. The 3-year MACRS depreciation method will be used on the new computer system. The old computer system has annual depreciation of $5,907. Both systems will be worthless in six years. The new system requires an initial investment of $5,945 in net working capital, which will be recovered at the end. The marginal tax rate is 0.34 and the annual required return is 0.08. What is the incremental cash flow of this replacement project in year six (the end of the project's life)? Round your answer to two decimals.

Reference no: EM131616381

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