Question: A complete small business computer system costs $40,000. In addition, it paid a consultant $1000 last year for her advice on the type of computer

A complete small business computer system costs $40,000. In addition, it paid a consultant $1000 last year for her advice on the type of computer system the company should buy. The new computer falls under the 5-year MACRS. This new system is expected to generate additional revenue of $15,000 per year for the next 3 years and also reduce expenses by $10,000 per year. At the end of 3 years, the system will be sold for $17,500. Tax rate is 34%. Round all values to the nearest dollar. Calculate initial investment, operating cash flows and terminal cash flow.

can you please show me terminal cash flow

here's what I have and clarify I'm right for first parts, thanks!

Initial Investment

Cost 40,000

Total Initial 40,000

Year

1

2

3

Revenue

15,000

15,000

15,000

Costs

-10,000

-10,000

-10,000

EBDT

25,000

25,000

25,000

Depreciation

8000

12800

7680

EBT

17000

12200

17320

Tax at 34%

5780

4148

5888.80

NIAT

11220

8052

11431.20

Depreciation

8000

12800

7680

CFAT

19220

20852

19,111.20

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!