CHAPTER 8 CASE answer - CHAPTER 9 CASE Determining Relevant...

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Unformatted text preview: CHAPTER 9 CASE Determining Relevant Cash Flows for Clark Upholstery Company's Machine Renewal or Replacement Decision Clark Upholstery is faced with a decision to either renew its major piece of machinery or to replace the machine. The case tests the students' understanding of the concepts of initial investment and relevant cash flows . a. Initial Investment A B Installed cost of new asset Cost of asset $90,000 $100,000 + Installation costs 10,000 Total proceeds, sale of new asset 90,000 110,000- After-tax proceeds from sale of old asset Proceeds from sale of old asset 0 (20,000) + Tax on sale of old asset* 8,000 Total proceeds, sale of old asset 0 (12,000) + Change in working capital 15,000 22,000 Initial investment $105,000...
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This note was uploaded on 10/09/2010 for the course BUS 407 taught by Professor Marshall during the Spring '10 term at Michigan State University.

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CHAPTER 8 CASE answer - CHAPTER 9 CASE Determining Relevant...

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