ne the undiscounted net cash flow after tax for the new machine and indicate

Ne the undiscounted net cash flow after tax for the

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ne the undiscounted net cash flow (after tax) for the new machine and indicate whether on e purchased. nt net cash flow, purchase point for new machine (i.e., at time period 0: 01 January 2 ntal net working capital (non-cash) at time period 0 hase price of new machine (including transportation, set-up cost, etc.) cash inflow from sale of existing machine: Current disposal (salvage) value of existing machine Tax effect at time of disposal: Original cost (at acquisition) Estimated salvage value (at acquisition)--for tax purposes Life (in years) Annual straight-line depreciation (see built-in Excel formula) Accumulated depreciation to date (3 years) Current NBV of existing machine (01 January 2013) Selling price Estimated loss on disposal of existing machine Tax shield from deductibility of loss After-tax cash inflow from sale of existing machine Net cash flow (after-tax), time period 0 (i.e., at 01 January 2013) nt (after-tax) cash inflow, years 1 through 5 (01 January 2013 through 31 December 2 ce in annual, after-tax (cash) variable costs, in favor of new machine ce in annual after-tax (cash) fixed costs, in favor of new machine ce in annual depreciation-related tax savings, in favor of new machine Annual SL depreciation, old machine (see above) Annual SL depreciation, new machine: Purchase price of new machine Estimated salvage value ($0.25 $0.19)/unit × 500,000 units/year × (1 0.40) ($25,000 $24,000) × (1 0.40)
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Life (in years) Annual depreciation deduction (SL basis) Annual difference in depreciation deduction Annual difference in depreciation-based tax savings, in favor of new machine rence in annual after-tax cash inflow (cost savings), in favor of new machine ne the relevant (after-tax) cash inflow at the end of the project's life (i.e., at the end mber 2017): Original Cost Total depreciation over five-year period, 2013 through 2017, inclusive NBV, 31 December 2017 (project terminal date) Estimated terminal (sales) value, end of 2017 Gain (Loss) on disposal Tax effect of gain (loss) After-tax cash flow (term. Value + tax savings) from sale of machines Difference in after-tax cash flow from disposal of machines at end of year 5 (in favor of new machine) Recovery of net working capital Difference in recovery of net working capital, in favor of new machine Relevant after-tax cash inflow, in favor of new machine nt Information nal cost ($150,000) of the old machine and the accumulated depreciation to date (3 years ts and therefore irrelevant to the decision. It should be noted, however, that both pieces o o determine the NBV of the old machine at time 0. In turn, the NBV affects the estimated g elf has a cash-flow effect through the income tax rate. nal net working capital outlay and recovery ($30,000) is also irrelevant because this occur -purchase decision. n (Undiscounted Basis) Net (after-tax cash flow, purchase of new machine: 01 January 2013)
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Cumulative, after-tax cash flow advantage--if new machine is purchased: Annual after-tax cash flow advantage Remaining years in the project After-tax cash flow, end of project life (31 December 2017), in favor of new machine Net benefit (cost) of purchasing new machine (undiscounted basis)
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