Akita Company is considering the replacement of an old machine that has an after-tax salvage value of $4,000. The new machine will cost $20,000. Net cash flows before replacement was expected to be $9,140 for Year 1 and $7,800 for Year 2. Net cash flows after replacement is expected to be $15,990 for Year 1 and $14,500 for Year 2. Depreciation for the old machine would be $3,000 for Year 1 and $0 for Year 2. Depreciation for the new machine would be $4,000 for both Year 1 and Year 2? In your replacement analysis, what would be the incremental cash flows for Year 1 if the machine is replaced?

$4,000

$3,990

$6,850

$2,850

Answer rating: 100% (QA)

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