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2. Blinko’s Co. is considering replacing its copying machine. OLD NEW Cost when new 30000 50000 Age 5 years 0 straight-line straight-line over over 10 Depreciation method years 10years to zero to zero 0 5000 salvage 5 yrs from today 25000 Net Working Capital(t=0 only) 2000 Returned at end of priest Market value today 18,000 50000 Remaining life 5 years 5 years The new machine is expected to increase revenue by $60,000 annually and operating expenses by $12,000. The tax rate is 40 percent, and the cost of capital is 12 percent. a) What is the initial investment for this project? (5 points) b) What is the incremental cash flow per year? (5 points) c) What is the difference in ending cash flow? (2 points) d) Should they replace the machine?

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