Question
A machine has a first cost of $100,000 (constant dollars) and a salvage value of $20,000 (actual dollars) at the end of its useful life
A machine has a first cost of $100,000 (constant dollars) and a salvage value of $20,000 (actual dollars) at the end of its useful life 10please see the table for your value). Each year it will eliminate one full-time worker. A worker costs $30,000 (constant dollars) in salary and benefits now. Labor costs are expected to escalate at 10% per year. Operating and maintenance costs are $10,000 (constant dollars) now and will escalate at 7% per year. Construct a table showing cash flows every year of labor savings, operation and maintenance costs, and salvage value in actual dollars. Calculate the net cash flow in actual dollars. Calculate the net cash flow in constant dollars using an overall rate of inflation of 7%.
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Financial Accounting and Reporting a Global Perspective
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
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