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A large store is deciding whether to install a machine in each of its store. Each machine costs $250,000. Projected income per machine is as
A large store is deciding whether to install a machine in each of its store. Each machine costs $250,000. Projected income per machine is as follows: Year 1 2 3 4 5 Sales 200,000 300,000 300,000 250,000 250,000 Operating Expenses 200,000 200,000 200,000 200,000 200,000 Depreciation 50,000 50,000 50,000 50,000 50,000 Accounting Income 0 50,000 50,000 0 0 Why would the store continue to operate a machine in Years 4 and 5 if it produces no profits? What are the cash flows from investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life. Show all your workings and justify your answer.
A large store is deciding whether to install a machine in each of its store. Each machine costs $250,000. Projected income per machine is as follows:
Year
1
2
3
4
5
Sales
200,000
300,000
300,000
250,000
250,000
Operating Expenses
200,000
200,000
200,000
200,000
200,000
Depreciation
50,000
50,000
50,000
50,000
50,000
Accounting Income
0
50,000
50,000
0
0
Why would the store continue to operate a machine in Years 4 and 5 if it produces no profits? What are the cash flows from investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life. Show all your workings and justify your answer.
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Wiley Federal Government Auditing Laws Regulations Standards And Practices
Authors: Edward F. Kearney, Roldan Fernandez, Jeffrey W. Green, David M. Zavada
2nd Edition
1118555856, 978-1118555859
