P11-1 (similar to)

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Relevant 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

$ 125 comma 000$125,000

and will generate annual operating cash inflows of

$ 28 comma 000$28,000

for the next

1818

years. In each of the

1818

years, maintenance of the project will require a

$ 4 comma 800$4,800

cash outflow.b. A new machine with an installed cost of

$ 88 comma 000$88,000.

Sale of the old machine will yield

$ 28 comma 000$28,000

after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by

$ 20 comma 000$20,000

in each year of a

66-year

period. At the end of year

66,

liquidation of the new machine will yield

$ 18 comma 000$18,000

after taxes, which is

$ 12 comma 000$12,000

greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year

66.

c. An asset that requires an initial investment of

$ 3$3

million and will yield annual operating cash inflows of

$ 307 comma 000$307,000

for each of the next

1414

years. Operating cash outlays will be

$ 15 comma 000$15,000

for each year except year

55,

when an overhaul requiring an additional cash outlay of

$ 495 comma 000$495,000

will be required. The asset's liquidation value at the end of year

1414

is expected to be zero.a. A project that requires an initial investment of

$ 125 comma 000$125,000

and will generate annual operating cash inflows of

$ 28 comma 000$28,000

for the next

1818

years. In each of the

1818

years, maintenance of the project will require a

$ 4 comma 800$4,800

cash outflow.(Select all the choices that apply.)

A.At year 0, the initial investment will be

negative $ 125 comma 000$125,000.

For each of the years 1 thru

1818,

the net cash flow will be

$ 28 comma 000 minus $ 4 comma 800 equals $ 23 comma 200$28,000$4,800=$23,200.

B.At year 0, the initial investment will be

negative $ 125 comma 000$125,000.

For each of the years 1 thru

1818,

the net cash flow will be $ 28 comma 000.$28,000.

C.

This is a conventional cash flow pattern, where the cash inflows are of equal size, which is referred to as an annuity.

D.The image is a time line that shows the annual operating cash inflows associated with a project. The time line shows years starting from Year 0 to Year 18. The cash inflow in Year 0 is -$ 125,000 dollars. The cash inflow in Year 1, Year 2, Year 3, Year 16, Year 17, and Year 18 is $ 23,200 dollars each.

YearYear

00

11

22

33

nothing

1616

1717

1818

Cash flowCash flow

negative $ 125,000$125,000

$ 23,200$23,200

$ 23,200$23,200

$ 23,200$23,200

nothing

$ 23,200$23,200

$ 23,200$23,200

$ 23,200