The company Transport KDG Co. company is planning an investment for their IT centre. The cost of
Question:
The company “Transport KDG Co.” company is planning an investment for their IT centre. The cost of the investment is 34,000€, which it is be paid for starting this investment.
The investment is expected to have 4 years useful life. There is not any salvage value (resale value after depreciation is complete at the end of its useful life of the investment). Depreciation is expensed on a straight-line basis (meaning the same amount is expensed in each period over the asset’s useful life).
The net income (profit after taxes) of the potential investment per year is tabulated below:
Year Profit after taxes
Year 1 8,100 €
Year 2 8,500 €
Year 3 8,800 €
Year 4 9,300 €
Last, acceptable payback period for the investment is 2.5 years.
Using this information, you are required to:
If a company runs this investment, calculate and discuss the sum of free cash flows for the 4 years (useful life), in comparison to the final profit or loss (sum) for the 4 years.
Fundamentals of Hydraulic Engineering Systems
ISBN: 978-0136016380
4th edition
Authors: Robert J. Houghtalen, A. Osman H. Akan, Ned H. C. Hwang