Given the following information, what is the effective cost of the new machine; that is, what is the cash flow at t = 0?
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Purchase price of new machine
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$8,000
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Installation charge
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2,000
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Market value of old machine
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2,000
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Book value of old machine
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1,000
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Inventory decrease if new machine is installed
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1,000
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Accounts payable increase if new machine is installed
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500
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Tax rate
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48%
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Cost of capital
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15%
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