Question: Your company is considering replacing the equipment for analyzing a caulking compound. The new equipment will cost $175,000 today, and will provide 10% savings of

Your company is considering replacing the equipment for analyzing a caulking compound. The new equipment will cost $175,000 today, and will provide 10% savings of the annual COGS. At the end of its life it can be sold as scrap for 15% of the original cost. Three year MACRS depreciation will be used for tax purposes. Annual working capital requirement is $20,000. Production will cease after 5 years. Corys tax rate is 25% and it uses a 10% WACC for this project. Please calculate the relevant cash flows for each year. Your company is considering replacing the equipment for analyzing a caulking compound. The new equipment will cost $175,000 today, and will provide 10% savings of the annual COGS. At the end of its life it can be sold as scrap for 15% of the original cost. Three year MACRS depreciation will be used for tax purposes. Annual working capital requirement is $20,000. Production will cease after 5 years. Corys tax rate is 25% and it uses a 10% WACC for this project. Please calculate the relevant cash flows for each year

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