2) J&K Company Limited is considering replacing its current machine with a more technologically advanced machine for the company's use. The company feels that by estimating and analyzing its cash flows it could make a more rational decision about this large purchase. The cash flow estimates for the machine purchase are as follows:

Purchase Price of New Machine	$20,500,000
Installation Cost	$350,000
Tax Rate	20%
Estimated Receipts from Selling New Machine in 5 years	$15,000,000
Current Book Value of Existing Machine	$13,000,000
Estimated Receipts from Selling existing machine today	$13,500,000
Estimated Receipts from selling existing machine in 5 years	$10,000,000
Accumulated Depreciation on new machine in 5 years	$5,000,000
Accumulated Depreciation on existing machine in 5 years	$4,000,000

a. Calculate J&K Company's After Tax Proceeds from Sale of Existing Asset today.

1. a. $2,600,000
2. $500,000
3. $13,400,000
4. $10,800,000

b. Calculate J&K's Initial Investment

1. $20,500,000
2. $7,450,000
3. $20,850,000
4. $7,100,000

c. Calculate J&K's profit/loss from the sale of the existing machine in 5 years

1. $6,000,000
2. $9,500,000
3. $9,000,000
4. $1,000,000

d. Calculate J&K's Terminal Cash Flow

1. $5,480,000
2. $5,370,000
3. $4,000,000
4. $5,300,000