IBC, Inc. is considering the purchase of a $300,000 computer that has an economic life of 5 years. The computer will be depreciated according to 5-year MACRS schedule (20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%). The market value of the computer will be $50,000 in 5 years. The use of computer will save annual costs of $100,000 for the next five years. For simplicity, these cost savings are assumed to occur at the end of these years. As a result of this project, the net working capital will increase by $40,000 immediately, and it will be recovered at the end of year 5. The firms tax rate is 40% and its cost of capital is 12%.

2. What is the initial investment requirement (t=0)?

$140,000

$200,000

$240,000

$260,000

$340,000

1 points

QUESTION 51

1. What is the operating cash flow one year from today (t=1)?

$73,824

$74,250

$83,040

$84,000

$98,400

1 points

QUESTION 52

1. What is the operating cash flow two years from today (t=2)?

$73,824

$74,250

$83,040

$84,000

$98,400

1 points

QUESTION 53

1. What is the operating cash flow three year from today (t=3)?

$73,824

$74,250

$83,040

$84,000

$98,400