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Answer quickly for thumbs up CHNG Level2, a small company, must purchase a new item of equipment costing $500,000 installed to stay in full production.
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"CHNG Level2", a small company, must purchase a new item of equipment costing $500,000 installed to stay in full production. The equipment will generate after-tax cash flows as follows: At the end of the third year, new bearings must be installed for $30,000 and again at the end of the sixth year for $40,000. Using the cumulative cash flow analysis, assuming a 10-year project life and time zero occurs when the initial equipment is purchased, show how the cash flows of this venture are affected if these bearings are considered as a. Capital investment b. Operating expense in the appropriate years. [12 marks] "CHNG Level2", a small company, must purchase a new item of equipment costing $500,000 installed to stay in full production. The equipment will generate after-tax cash flows as follows: At the end of the third year, new bearings must be installed for $30,000 and again at the end of the sixth year for $40,000. Using the cumulative cash flow analysis, assuming a 10-year project life and time zero occurs when the initial equipment is purchased, show how the cash flows of this venture are affected if these bearings are considered as a. Capital investment b. Operating expense in the appropriate years. [12 marks]Step by Step Solution
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