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Incremental Operating Cash Flows

Wilbur Corporation is considering replacing a machine. The replacement will cut operating expenses by $24,000 per year for each of the five years that the new machine is expected to last. Although the old machine has a zero book value, it has a remaining useful life of five years. The depreciable value of the new machine is $72,000. Wilbur will depreciate the machine under MACRS using a five year recovery period, and is subject to a 40 perecent tax rate on ordinary income. Estimate the incremental operating cash flows attributable to the replacement. Be sure to consier the depreciation in year 6.

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Wilbur Corporation is considering replacing a machine. The replacement will cut operating expenses by $24,000 per year for each of the five years that the new ...

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Response helps in estimating Incremental Operating Cash Flows

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