Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

can someone help me with a cashflow for this question? I think I am getting it wrong Assume everything is given in n=0, CONSTANT dollars

can someone help me with a cashflow for this question? image text in transcribedI think I am getting it wrong

Assume everything is given in n=0, CONSTANT dollars unless otherwise stated: Hartsfield Company is considering purchasing a set of machine tools at a cost of $60,000. The purchase is expected to generate revenues of $26,000. The purchase of the tools will also lead to higher operating costs of $8,000 per year in each of the next three years. Additional profits will be taxed at a rate of 30%. The asset falls into CCA Class 45 (rate = 40%) for tax purposes and the 50% rule applies. The project has a three-year life. The constant-dollar market (re-sale) value of the machine tools is expected to fall by 40% annually. The company will require a working capital of $8,000 to be maintained in purchasing power over the lifetime of the project and can be recovered at the time of the project's completion. The general inflation rate is 6% per year (and affects everything that it normally affects). Assume a MARR' =5%. (Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar. Note: .5 rounds up) The NPW of the project of the project is within $50 of Assume everything is given in n=0, CONSTANT dollars unless otherwise stated: Hartsfield Company is considering purchasing a set of machine tools at a cost of $60,000. The purchase is expected to generate revenues of $26,000. The purchase of the tools will also lead to higher operating costs of $8,000 per year in each of the next three years. Additional profits will be taxed at a rate of 30%. The asset falls into CCA Class 45 (rate = 40%) for tax purposes and the 50% rule applies. The project has a three-year life. The constant-dollar market (re-sale) value of the machine tools is expected to fall by 40% annually. The company will require a working capital of $8,000 to be maintained in purchasing power over the lifetime of the project and can be recovered at the time of the project's completion. The general inflation rate is 6% per year (and affects everything that it normally affects). Assume a MARR' =5%. (Remember to round up/down to whole dollar figures for EVERY entry in the income statement and cash flow statement. Solutions are also rounded to the nearest dollar. Note: .5 rounds up) The NPW of the project of the project is within $50 of

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Financial Markets

Authors: Keith Pilbeam

2nd Edition

1403948356, 978-1403948359

More Books

Students also viewed these Finance questions

Question

Find z such that P(Z > z) = 0.12.

Answered: 1 week ago

Question

Discuss the roles of metacognition in learning and remembering.

Answered: 1 week ago