Question

Pelican Cove Corporation is trying to decide whether to invest in equipment to manufacture a new product. If the investment project is accepted, sales revenue will increase by $65,000 per year and materials costs will increase by $18,000 per year. The equipment will cost $140,000 and is depreciable over 10 years using simplified straight line. The firm has a marginal tax rate of 34%. Calculate the firm's annual cash flows resulting from the new project.

Answer 1

Answer:

$35,780.-

Explanation:

The company´s cash flow equals the cash coming into the business minus the cash going out.  Annualizing your cash flow converts it to an annual amount that you can compare to cash flows from previous years.