Your firmMoms cookies is considering the purchase of a new cookie oven. The original cost of...

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Your firmMoms cookies is considering the purchase of anew cookie oven. The original cost of the old oven was $35000;it isnow 5 years old and it has a current market value of $15000. Theold oven is being depreciated over a 10 year life toward a zeroestimated salvage value on a strait line basis resulting in acurrent book value of !17500 and an annual depreciation expense of3500. The old oven can be used for six more years but has no marketvalue after its depreciation life is over. Management iscontemplating the purchsse of a new oven whose cost is $27000 andwhose estimated salvage value is zero. Expected before tax cashsavings from the new oven are $4200 a year over its full MACROSdepreciable life. Depreciation is computed using MACROS over a 5year life and the cost of capital is 10 percent. Assume a 30percent tax rate. What will the cash flows for this project be?

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Your firmMoms cookies is considering the purchase of anew cookie oven. The original cost of the old oven was $35000;it isnow 5 years old and it has a current market value of $15000. Theold oven is being depreciated over a 10 year life toward a zeroestimated salvage value on a strait line basis resulting in acurrent book value of !17500 and an annual depreciation expense of3500. The old oven can be used for six more years but has no marketvalue after its depreciation life is over. Management iscontemplating the purchsse of a new oven whose cost is $27000 andwhose estimated salvage value is zero. Expected before tax cashsavings from the new oven are $4200 a year over its full MACROSdepreciable life. Depreciation is computed using MACROS over a 5year life and the cost of capital is 10 percent. Assume a 30percent tax rate. What will the cash flows for this project be?