Question

Jared Kidd is considering whether to invest in a computer game machine that he would place in a hotel his brother owns. The machine would cost $17,000 and has an expected useful life of three years and a salvage value of $2,000. Mr. Kidd estimates the machine would generate revenue of $8,000 per year and cost $1,500 per year to operate. He uses the straight-line method for depreciation. His income tax rate is 30 percent.

Required
What amount of net cash inflow from operations would Mr. Kidd expect for the first year if he invests in the machine?



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  • CreatedFebruary 07, 2014
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