The Falcon company is considering to purchase a printing machine. The relevant information is given below: Cost
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Question:
Cost of the printing machine: $150,000
Annual cash inflows: $45,000
Useful life of printing machine: 15 years
Salvage value (Residual value) after 15-year period: $10,000
Annual cash expenses: $5,000
Falcon company uses straight line method of depreciation. Salvage value is not taken into account for calculating depreciation for tax purposes. Tax rate of Falcon company is 30% . Company requires a 14% after-tax return on all investments.
Required: Compute net present value of the printing machine.
Related Book For
Managerial Accounting
ISBN: 978-0078111006
14th edition
Authors: Ray Garrison, Eric Noreen and Peter Brewer
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