Question
The Becker Company is interested in buying a piece of equipment that it needs. The following data have been assembled concerning this equipment: Cost of
The Becker Company is interested in buying a piece of equipment that it needs. The following data have been assembled concerning this equipment:
Cost of required equipment... $250,000
Working capital required... $100,000
Annual operating cash inflows... $80,000
Cash repair at end of 4 years... $40,000
Salvage value at end of 6 years... $90,000
This equipment is expected to have a useul life of 6 years. At the end of the sixth year the working capiral would be released for use elsewhere. The company's discount rate is 10%
1. The present value of all future operating cash inflows is closest to:
A. $480,000
B. $452,300
C. $348,400
D. $278,700
2. The present value of the net flows (all cahs inflows less all cash outflows) occuring during year 4 is:
A. $40,000
B. $27,320
C.$54,640
D. $42,790
3. The present value of the net cash flows (all cahs inflows less all cash outflows) occuring during year 6 is:
A. $270,000
B. $195,900
C. $107,200
D. $152,300
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started