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Marta_Voda [28]
3 years ago
9

Butler Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from

the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Butler requires a 12% return on its investments. The present value of an annuity of $1 for different periods follows:
Periods 10 Percent
1 0.9091
2 1.7355
3 2.4869
4 3.1699

Required:
What is the net present value of the machine?
Business
1 answer:
kobusy [5.1K]3 years ago
7 0

Answer:

($3,100)

Explanation:

Net cash flows each year = Projected annual after-tax net income + Depreciation

Net cash flows each year = $1,200 + $10,000

Net cash flows each year = $11,200 each year

Total value of inflows in 3 years = Net cash flows each year * Annuity factor of (10%,3 years)

Total value of inflows in 3 years = $11,200 * 2.4018

Total value of inflows in 3 years = $26,900

Net Present value = Present value of inflows - Cash outflow

Net Present value = $26,900 - $30,000

Net Present value = ($3,100)

So, tnet present value of the machine is ($3,100).

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Option B $17,285 is correct the answer.

Explanation:

<u>Computation Table                       </u>

<u>Particular                         Amount</u>

Ending balance        $18,600

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Less: Outstanding  $2,100

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<u>Less</u><u>: EFT                 $1,600 </u>

<u>Cash balance          $17285 </u>

<u></u>

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On October 1. Ebony Ernst organized Ernst Consulting, on October 3. the owner contributed $84,310 in assets in exchange for its
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Answer and Explanation:

The Preparation of the statement of cash flows is shown below:-

                                      <u>Ernst Consulting</u>

                                    <u>Statement of cash flows</u>

                                <u>For the year ended Oct 31</u>

<u>Particulars                                                     Amount</u>

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Cash paid for salaries                  -$2,160

($7,350 - $5,190)

Cash paid for rent                        -$3,910  

Paid cash for telephone

expense                                         -$790  

Paid cash for miscellaneous

expense                                        -$610  

Net cash flow from operating activities          -$7,470

Cash flow from investing activities

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Net cash flow from investing activities             -$18,310

Cash flow from financing activities

dividend paid                                 -$2340

Initial investment in Cash              $38,320  

Net cash flow from financing activities             $35,980

Net cash increase/decrease                                $10,200

Beginning Cash                                                      0

Ending Cash                                                           $10,200

Therefore we indicate the minus sign for cash outflow while the positive amount shows cash inflow.

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Answer:

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Answer:

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2 years ago
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