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Unformatted text preview: eveloped in Table 8.8 are given in columns 1 and 2. Column 2 values
represent the amount of operating cash inflows that Powell Corporation will
receive if it does not replace the present machine. If the proposed machine replaces
the present machine, the firm’s operating cash inflows for each year will be those
shown in column 1. Subtracting the present machine’s operating cash inflows
from the proposed machine’s operating cash inflows, we get the incremental operating cash inflows for each year, shown in column 3. These cash flows represent
the amounts by which each respective year’s cash inflows will increase as a result
of the replacement. For example, in year 1, Powell Corporation’s cash inflows
would increase by $26,480 if the proposed project were undertaken. Clearly,
these are the relevant inflows to be considered when evaluating the benefits of
making a capital expenditure for the proposed machine.12 TABLE 8.9 Incremental (Relevant) Operating Cash
Inflows for Powell Corporation
Operating cash inflows Year Proposed machinea
(1) Present m...
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This document was uploaded on 01/19/2014.
- Fall '13