Grind company is considering replacing an existing machine. The new machine is expected to reduce labor costs by $138,000 per year for 5 years. Depreciation on the new machine is $68,000 per year compared with $56,000 on the old machine. In addition, inventory will increase $250,000 to t=1, to $319,000 at t=2 and remain there until the end of the project. Tax rate is 30%. 

What is the relevant cash flow in year 2?

Answer rating: 100% (QA)

To calculate the relevant cash flow in year 2 we need to consider the various factors that affect ca... View the full answer