Question: Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $104,000 per year for 5 years. Depreciation

Grind Co. is considering replacing an existing machine. The new machine is expected to reduce labor costs by $104,000 per year for 5 years. Depreciation on the new machine is $75,000 per year compared with $72,000 on the old machine. In addition, inventory will increase from $250,000 at t=1 to $394,000 at t=2 and remain there until the end of the project. The tax rate is 30%. What is the relevant cash flow in year 2?

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