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
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
