Question
Management is considering purchasing a machine for $780,000 that would have a useful life of 8 years and $52,000 salvage value. The asset would generate
Management is considering purchasing a machine for $780,000 that would have a useful life of 8 years and $52,000 salvage value. The asset would generate annual net cash inflows of $121,500 throughout its useful life. The project would require additional working capital of $95,000. The companys discount rate is 5%. In year 6 the machine will require $28,000 overhaul.
What is the present value of the working capital and working capital release?
$95,000 working capital and $95,000 working capital release | ||
$64,300 working capital and $95,000 working capital release | ||
$95,000 working capital and $64,300 working capital release | ||
None of the above |
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