Net cash flow and timeline depiction For each of the following projects, determine the net cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $123,000 and will generate annual operating cash inflows of $22,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $4,800 cash outflow. b. A new machine with an installed cost of $87,000. Sale of the old machine will yield $31,000 after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $22,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $17,000 after taxes, which is $10,000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6. c. An asset that requires an initial investment of $3 million and will yield annual operating cash inflows of $293,000 for each of the next 10 years. Operating cash outlays will be $22,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $495,000 will be required. The asset's liquidation value at the end of year 10 is expected to be zero.
Net cash flow and timeline depiction For each of the following projects, determine the net cash flows, and depict the cash flows on a time line. a. A project that requires an initial investment of $123,000 and will generate annual operating cash inflows of $22,000 for the next 18 years. In each of the 18 years, maintenance of the project will require a $4,800 cash outflow. b. A new machine with an installed cost of $87,000. Sale of the old machine will yield $31,000 after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by $22,000 in each year of a 6-year period. At the end of year 6, liquidation of the new machine will yield $17,000 after taxes, which is $10,000 greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year 6. c. An asset that requires an initial investment of $3 million and will yield annual operating cash inflows of $293,000 for each of the next 10 years. Operating cash outlays will be $22,000 for each year except year 5, when an overhaul requiring an additional cash outlay of $495,000 will be required. The asset's liquidation value at the end of year 10 is expected to be zero.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 2PA
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Net cash flow and timeline depiction For each of the following projects, determine the net cash flows, and depict the cash flows on a time line.
a. A project that requires an initial investment of
cash inflows of
cash outflow .
$123,000
and will generate annual operating $22,000
for the next
18
years. In each of the
18
years, maintenance of the project will require a
$4,800
b. A new machine with an installed cost of
$87,000.
Sale of the old machine will yield
$31,000
after taxes. Operating cash inflows generated by the replacement will exceed the operating cash inflows of the old machine by
$22,000
in each year of a
6-year
period. At the end of year
6,
liquidation of the new machine will yield
$17,000
after taxes, which is
$10,000
greater than the after-tax proceeds expected from the old machine had it been retained and liquidated at the end of year
6.
c. An asset that requires an initial investment of
$3
million and will yield annual operating cash inflows of
$293,000
for each of the next
10
years. Operating cash outlays will be
$22,000
for each year except year
5,
when an overhaul requiring an additional cash outlay of
$495,000
will be required. The asset's liquidation value at the end of year
10
is expected to be zero.Expert Solution
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