I want you to provide me the Cash Flow diagram of the problem. Only cash flow diagram, the solution is already there. Thanks in advance!The annual estimated cash flow is $140,000.The salvage value will be 12% of the initial price after 5 years.The discount rate (r) is 18%Let us assume the initial price of the doughnut machine be X.PV of cash inflows=PV of cash outflows$140,000×PVAF4,18%+.12X×PVF5,18%=X$140,000×2.69006180465+.12X×0.43710921621=X$376,608.652651=X-0.05245310594$376,608.652651=0.94754689406XX=$397,456.479475The maximum purchase price of the doughnut machine is $397,456.48. 1.Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2018 a customer asked Beloit to quote a pricefor a custom-designed doughnut machine to be delivered by the end of 2018. Once it is purchased, the customer intendsto place the machine in service in January 2019 and will use it four years. The expected annual operating cash flow isestimated to be $140,000. The expected salvage value of the equipment at the end of five years is about 12% of theinitial purchase price. To expect an 18% required rate of return on investment, what is the maximum amount thatshould be spent on purchasing the doughnut machine? Ans. P= $397,456.48

A cash flow diagram is a monetary apparatus used to address the sources of income related with a…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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I want you to provide me the Cash Flow diagram of the problem. Only cash flow diagram, the solution is already there. Thanks in advance!

The annual estimated cash flow is $140,000.

The salvage value will be 12% of the initial price after 5 years.

The discount rate (r) is 18%

Let us assume the initial price of the doughnut machine be X.

PV of cash inflows=PV of cash outflows$140,000×PVAF4,18%+.12X×PVF5,18%=X$140,000×2.69006180465+.12X×0.43710921621=X$376,608.652651=X-0.05245310594$376,608.652651=0.94754689406XX=$397,456.479475

The maximum purchase price of the doughnut machine is $397,456.48.

1.Beloit Co. is a manufacturer of mini-doughnut machine makers. Early in 2018 a customer asked Beloit to quote a price
for a custom-designed doughnut machine to be delivered by the end of 2018. Once it is purchased, the customer intends
to place the machine in service in January 2019 and will use it four years. The expected annual operating cash flow is
estimated to be $140,000. The expected salvage value of the equipment at the end of five years is about 12% of the
initial purchase price. To expect an 18% required rate of return on investment, what is the maximum amount that
should be spent on purchasing the doughnut machine? Ans. P= $397,456.48

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