Question
Michaels, Inc. purchased a machine for $75,000. The machine has a useful life of five years and no salvage value. Straight-line depreciation is to be
Michaels, Inc. purchased a machine for $75,000. The machine has a useful life of five years and no salvage value. Straight-line depreciation is to be used. The machine is expected to generate cash flow from operations, net of income taxes, of $25,000 in each of the five years. Michaels' expected rate of return is 10%. Information on present value factors is as follows:
Period | Present Value of $1 at 10% | Present value of ordinary annuity of $1 at 10% |
1 | 0.90909 | 0.90909 |
2 | 0.82645 | 1.73554 |
3 | 0.75132 | 2.48685 |
4 | 0.68301 | 3.16986 |
5 | 0.62092 | 3.79079 |
What would be the net present value?
Michaels, Inc. purchased a machine for $75,000. The machine has a useful life of five years and no salvage value. Straight-line depreciation is to be used. The machine is expected to generate cash flow from operations, net of income taxes, of $25,000 in each of the five years. Michaels' expected rate of return is 10%. Information on present value factors is as follows: Period Present Value of $1 at 10% Present value of ordinary annuity of $1 at 10% 1 0.90909 0.90909 2 0.82645 1.73554 3 0.75132 2.48685 4 0.68301 3.16986 5 0.62092 3.79079 What would be the net present value
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