Question
Calculating 'cash flows over the life' Peaches Corporation is evaluating whether to replace its old canning machine with a new one that costs $400,000 and
Calculating 'cash flows over the life' Peaches Corporation is evaluating whether to replace its old canning machine with a new one that costs $400,000 and has a five-year life for tax purposes. This new machine is more efficient and will reduce annual operating expenses by $38,000 each year from $150,000. Three months ago, Peaches Corporation paid $10,000 for a consulting report from Sherlock Consultants, investigating the cost savings associated with the new canning machine. Peaches Corporation will borrow $400,000 to fund the machine. Annual loan repayments are $37,000. The firm will sell its old canning machine for $45,000 and this machine is being depreciated at $10,000 per year over its remaining five-year life. The old canning machine is associated with sales revenue of $200,000 per annum. Cash sales associated with the new canning machine are predicted to be $270,000 per annum. Assume the company tax rate is 30%. What are the 'cash flows over the life'?
(not on excel please, just listed)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started