Question
Jefferson Corporation is purchasing equipment with a 10-year life which will increase revenue by $38,000 per year and increase expenses by $21,000 per year. The
Jefferson Corporation is purchasing equipment with a 10-year life which will increase revenue by $38,000 per year and increase expenses by $21,000 per year. The cost of the project is $24,000, and the equipment has a salvage value of $9,000 at the end of the tenth year. The project will require a $6,000 investment in net working capital immediately. The equipment will be depreciated for 10 years using simplified straight line. Jefferson's marginal tax rate is 35%. Calculate the total year 10 net cash flow, including both the last annual cash flow and the project's terminal cash flow.
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