Question
1. A machine is expected to produce annual savings in cash operating costs of $300,000 for the next four years. FV of 1 (i =
1.
A machine is expected to produce annual savings in cash operating costs of $300,000 for the next four years.
| FV of 1 (i = 5%, n = 4): | 1.216 |
| FV of a series of $1 cash flows (i = 5%, n = 4): | 4.310 |
| PV of $1 (i = 5%; n = 4): | 0.823 |
| PV of a series of $1 cash flows (i = 5%, n = 4): | 3.546 |
If the company has a(n) 5% after-tax hurdle rate and is subject to a 30% income tax rate, the correct discounted net cash flow would be:
2.
A machine is expected to produce increases in cash operating costs of $220,000 for the next six years.
| FV of 1 (i = 14%, n = 6): | 2.195 |
| FV of a series of $1 cash flows (i = 14%, n = 6): | 8.536 |
| PV of $1 (i = 14%; n = 6): | 0.456 |
| PV of a series of $1 cash flows (i = 14%, n = 6): | 3.889 |
If the company has a(n) 14% after-tax hurdle rate and is subject to a 30% income tax rate, the correct discounted net cash flow would be:
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College Accounting, Chapters 1-15
Authors: James A. Heintz, Robert W. Parry
21st Edition
1285639723, 9781285639727
