ou are reviewing some material that deals with investment analysis, preparing for your first day on the job at Enrique Enterprises. Consider the cash flows that follow.

1. The immediate payment required to purchase a $710,000 milling machine.

2. Straight-line depreciation of $31,000 in year 2 of a long-term investment.

3. Annual savings in cash operating costs of $61,000 over the next 7 years.

4. Sale of a machine for $40,500 at the end of its 6-year service life. The machine has a book value of $26,100.

5. A $7,100 equipment overhaul in year 5 that is fully deductible for income tax purposes.

Year	FV of $1 at 12%				FV of an ordinary annuity at 12%				PV of $1 at 12%				PV of an ordinary annuity at 12%
1		1.120				1.000				0.893				0.893
2		1.254				2.120				0.797				1.690
3		1.405				3.374				0.712				2.402
4		1.574				4.779				0.636				3.037
5		1.762				6.353				0.567				3.605
6		1.974				8.115				0.507				4.111

Required:

Calculate the discounted cash flow that is appropriate for each of the preceding items. Assume a 12% after-tax hurdle rate and a 40% income tax rate

Year	Discounted cash flow
1
2
3
4
5