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Question: Atlantic Control Company purchased a machine 2 years ago at a cost of $70,000. The machineis being depreciated using simplified straight-line over its 7-year class life. The machine would have no salvage value at the end of year 7, but could be sold now for $40,000. A new replacement machine can be purchased for $80,000. The new machine would bedepreciated over 5 years. Rapidly changing technology has necessitated this project. Deliveryand installation charges will amount to $10,000 and net working capital investment of $5,000will be required at installation. The new machine will not increase sales, but will reduceoperating costs by $20,000 per year. The firm's marginal tax rate is 35%. What is the initialoutlay for the project?

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