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You are considering the purchase of a new machine that will cost $200,000 and be depreciated over five years using straight-line depreciation. You expect that it will require $20,000 per year in annual maintenance, and that you will need to purchase $10,000 in spare parts at the time you purchase the machine. You will maintain a steady inventory of spare parts until you sell off the machine in four years for $32,000, at which time your inventory of spare parts will be zero. You also expect that you will need to spend $4,000 in initial training for your employees on how to use the machine most effectively. If your tax rate is 25%, and your WACC is 10%, please answer the following questions. What is the net salvage value of your machine in four years? $32,000 $42,000 $40,000 O $34,000 What is the operating cash flow created each year by purchasing this machine? O$5,000 $20,000 O545,000 2S60,000 You are considering the purchase of a new machine that will cost $200,000 and be depreciated over five years using straight-line depreciation. You expect that it will require $20,000 per year in annual maintenance, and that you will need to purchase $10,000 in spare parts at the time you purchase the machine. You will maintain a steady inventory of spare parts until you sell off the machine in four years for $32,000, at which time your inventory of spare parts will be zero. You also expect that you will need to spend $4,000 in initial training for your employees on how to use the machine most effectively. If your tax rate is 25%, and your WACC is 10%, please answer the following questions. What is the net salvage value of your machine in four years? $32,000 $42,000 $40,000 O $34,000 What is the operating cash flow created each year by purchasing this machine? O$5,000 $20,000 O545,000 2S60,000
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Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
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