Question 5 - Estimating cash flows For each of the following cash flows, indicate whether it should be included in the calculations evaluating an investment project lasting three years. Explain why. a. A new machine bought for the project. b. The annual depreciation expense (straight line depreciation rule used) for this machine. c. Tax benefits on depreciation for the machine. d. Net working capital expenditures of £6,000 in year 0; £8,000 in year 1; £4,000 in year 2; 0 in year 3. e. Consultancy fee to identify the right machine for the job. f. Use of 20% capacity (otherwise not utilized) of another machine bought for another project for £15,000. g. Dividends paid to shareholders funded by the revenue from this project. h. Sale of the old machine you are replacing with this new project.
Question 5 - Estimating cash flows For each of the following cash flows, indicate whether it should be included in the calculations evaluating an investment project lasting three years. Explain why. a. A new machine bought for the project. b. The annual depreciation expense (straight line depreciation rule used) for this machine. c. Tax benefits on depreciation for the machine. d. Net working capital expenditures of £6,000 in year 0; £8,000 in year 1; £4,000 in year 2; 0 in year 3. e. Consultancy fee to identify the right machine for the job. f. Use of 20% capacity (otherwise not utilized) of another machine bought for another project for £15,000. g. Dividends paid to shareholders funded by the revenue from this project. h. Sale of the old machine you are replacing with this new project.
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter3: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 12P
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