A-C
Net cash flow and timeline depiction For each of the following projects, determine the net cash flows, and depict the cash flows on a timeline a. A project that requires an initial investment of $121,000 and will generate annual operating cash inflows of $28.000 for the next 18 years in each of the 18 years, maintenance of the project will require a $4,800 cash outflow b. A new machine with an installed cost of $81,000. Sale of the old machine will yield 526,000 after taxes Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20 000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $24,000 after taxes, which is $9.000 greater than the after tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6 c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $300,000 for each of the next 12 years Operating cash outlays will be $19,000 for each year except year 5 when an overhaul requiring an additional cash outlay of $508,000 will be required. The asset's liquidation value at the end of year 12 is expected to be zero a. A project that requires an initial investment of $121,000 and will generate annual operating cash inflows of $28.000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $4800 cash outflow (Select all the choices that apply) A. This is a conventional cash flow pattem, where the cash inflows are of equal size, which is referred to as an annuity B. Year 0 1 16 17 18 Cash flow - $121.000 $23,200 $23,200 $23,200 $23,200 $23,200 $23,200 C. At year, the initial investment will be - $121,000. For each of the years 1 thru 18, the net cash flow will be $28,000 - 54,800 = $23.200 D. At year, the initial investment will be - 5121,000. For each of the years 1 thru 18, the net cash flow will be $28,000 b. A new machine with an installed cost of $81,000 Sale of the old machine will yield $26,000 after taxes Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $24,000 after taxes, which is $9,000 greater than the after tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6 (Select all the choices that apply) A Year 0 1 Cash flow - $55,000 $20,000 $20,000 $20,000 $20,000 $20,000 $29,000 B. This is a conventional cash flow pattem, where the subsequent cash inflows vary, which is referred to as a mixed stream C. At year, the initial investment will be - $81,000 $20,000 --- $55,000. For each of the years 1 thru 5, the net cash flow will be $20,000. Al year 6, the net cash flow will be $20,000 $24,000 - $15,000 = $29,000 DD Year 0 1 2 3 Cash flow - $55,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Click it ans c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $309,000 for each of the next 12 years. Operating cash outlays will be $19,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $500,000 will be required. The asset's liquidation value at the end of year 12 is expected to be zero (Select all the choices that apply) A. Al year, the initial investment will be - $2,000,000. For each of the years 1 thru 4 and 6 thru 12, the net cash flow will be $300,000. Al year 5, the net cash flow will be $309,000 - $508,000 = - $199,000 B. This is a nonconventional cash flow pattern with several cash flow series of equal size, which is referred to as an embedded annuity c. Year 0 11 12 Cash flow $290,000 S290,000 - $199,000 $290,000 $290,000 $290,000 - $2 million D. At year, the initial investment will be - $2,000,000. For each of the years 1 thru 4 and 6 thru 12, the net cash flow will be $309.000 - $19,000 = $290,000. At year 5, the not cash flow will be $309.000 - $508,000 -$199,000
