9 demonstrates the calculation of powell corporations

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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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