Daily Enterprises is purchasing a $10.31 million machine. It will cost $79,046.0

Question

Daily Enterprises is purchasing a $10.31 million machine. It will cost $79,046.00 to transport and install the machine. The machine has a depreciable life of five years using the straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.57 million per year along with incremental costs of $1.40 million per year. Daily’s marginal tax rate is 34.00%. The cost of capital for the firm is 12.00%. (answer in dollars..so convert millions to dollars) What is the year 0 cash flow for the project? Round to 2 decimal places.

Explanation / Answer

Year 0 cash flows means cash flows at the beginning of project. So, Year 0 Cash flows is calculated as follows: Cost of Machine $ 1,03,10,000.00 Transportation and Installation cost $           79,046.00 Year 0 Cash flow $ 1,03,89,046.00

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