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 $115,000 and will generate annual operating cash inflows of $25,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $5,300 cash outflow. b. A new machine with an installed cost of $89,000. Sale of the old machine will yield $25,000 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 $18,000 after taxes, which is $12,000 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 $309,000 for each of the next 12 years. Operating cash outlays will be $17,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $490,000 will be required. The asset's liquidation value at the end of year 12 is expected to be zero. a. A project that requires an initial investment of $115,000 and will generate annual operating cash inflows of $25,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $5,300 cash outflow. (Select all the choices that apply.) A. At year 0, the initial investment will be - $115,000. For each of the years 1 thru 20, the net cash flow will be $25,000 - $5,300 = $19,700 B. At year 0, the initial investment will be - $115,000. For each of the years 1 thru 20, the net cash flow will be $25,000 OC. Year 0 1 2 3 18 19 20 Cash flow - $115,000 $19,700 $19.700 $19,700 $19,700 $19,700 $19,700 D. This is a conventional cash flow pattern, where the cash inflows are of equal size, which is referred to as an annuity. Click to select your answer(s) and then click Check Answer. ? 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 $115,000 and will generate annual operating cash inflows of $25,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $5,300 cash outflow. b. A new machine with an installed cost of $89,000. Sale of the old machine will yield $25,000 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 $18,000 after taxes, which is $12,000 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 $309,000 for each of the next 12 years. Operating cash outlays will be $17,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $490,000 will be required. The asset's liquidation value at the end of year 12 is expected to be zero. a. A project that requires an initial investment of $115,000 and will generate annual operating cash inflows of $25,000 for the next 20 years. In each of the 20 years, maintenance of the project will require a $5,300 cash outflow. (Select all the choices that apply.) A. At year 0, the initial investment will be - $115,000. For each of the years 1 thru 20, the net cash flow will be $25,000 - $5,300 = $19,700 B. At year 0, the initial investment will be - $115,000. For each of the years 1 thru 20, the net cash flow will be $25,000 OC. Year 0 1 2 3 18 19 20 Cash flow - $115,000 $19,700 $19.700 $19,700 $19,700 $19,700 $19,700 D. This is a conventional cash flow pattern, where the cash inflows are of equal size, which is referred to as an annuity. Click to select your answer(s) and then click Check
