Cobblestone Corporation is considering a capital expenditure proposal that will require an initial cash outlay of $75,000.

Question:

Cobblestone is considering a capital expenditure proposal that will require an initial cash outlay of $75,000. The project life is expected to be 6 years. The estimated for the equipment (based on today's market price for similar used 6-year old equipment) is $5,000. Estimated annual net cash inflows from operations during the life of the project are as follows:
Year Estimated Annual Cash Inflow
1 .................................. $15,000
2 .................................. 20,000
3 .................................. 20,000
4 .................................. 20,000
5 .................................. 15,000
6 .................................. 10,000
Required:
Compute the excess of cash inflows over cash outflows assuming management expects a constant 6% rate of inflation during the 6-year period. (Round the price level index to three decimal places.)
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