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Given the following information, what is the effective cost of the new machine; that is, what is the cash flow at t = 0?

Purchase price of new machine

$8,000

Installation charge

2,000

Market value of old machine

2,000

Book value of old machine

1,000

Inventory decrease if new machine is installed

1,000

Accounts payable increase if new machine is installed

500

Tax rate

48%

Cost of capital

15%

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