Net cash flow and timeline depiction For each of the following projects, determine the net cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $120,000 and will generate annual operating cash inflows of $25,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $5,000 cash outflow. b. A new machine with an installed cost of $85,000. Sale of the old machine will yield $30,000 after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $20,000 after taxes, which is $10,000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6. c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $300,000 for each of the next 10 years. Operating cash outlays will be $20,000 for each year except year 6, when an overhaul requiring an additional cash outlay of $500,000 will be required. The asset's liquidation value at the end of year 10 is expected to be zero. a. A project that requires an initial investment of $120,000 and will generate annual operating cash inflows of $25,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $5,000 cash outflow. (Select all the choices that apply.) O A. At year 0, the initial investment will be - $120,000. For each of the years 1 thru 18, the net cash flow will be $25,000 B. This is a conventional cash flow pattern, where the cash inflows are of equal size, which is referred to as an annuity C. At year 0, the initial investment will be - $120,000. For each of the years 1 thru 18, the net cash flow will be $25,000 - $5,000 = $20,000. OD. Year 16 17 18 o Cash flow - $120,000 $20,000 $20.000 $20,000 $20,000 $20,000 $20,000 b. A new machine with an installed cost of $85,000. Sale of the old machine will yield $30,000 after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $20,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $20,000 after taxes, which is $10,000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6. (Select all the choices that apply.) DA. Year 0 2 3 4 5 6 Cash flow - $55,000 $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 OB. Year 0 1 2 4 5 Cash flow - $55.000 $20.000 $20.000 $20.000 $20.000 $20.000 $30.000 C. This is a conventional cash flow pattern, where the subsequent cash inflows vary, which is referred to as a mixed stream OD. At year 0, the initial investment will be - $85,000 + $30,000 = - $55,000. For each of the years 1 thru 5, the net cash flow will be $20,000. At year 6, the net cash flow will be $20,000 + $20,000 - $10,000 = $30,000. c. An asset that requires an initial investment of $2 million and will yield annual operating cash inflows of $300,000 for each of the next 10 years. Operating cash outlays will be $20,000 for each year except year 6, when an overhaul requiring an additional cash outlay of $500,000 will be required. The asset's liquidation value at the end of year 10 is expected to be zero. (Select all the choices that apply.) O A Year 0 1 5 6 7 9 10 $280,000 $280,000 - $200,000 $280,000 $280,000 $280,000 Cash flow -$2 million OB. At year 0, the initial investment will be - $2,000,000. For each of the years thru 5 and 7 thru 10, the net cash flow will be $300,000 - $20,000 = $280,000. At year 6, the net cash flow will be $300,000 - $500,000 = - $200,000 C. At year 0, the initial investment will be - $2,000,000. For each of the years 1 thru 5 and 7 thru 10, the net cash flow will be $300,000. At year 6, the net cash flow will be $300,000 - $500,000 = - $200,000. OD. This is a nonconventional cash flow pattern with several cash flow series of equal size, which is referred to as an embedded annuity