y Bookmarks People Window Help 16&ispry&drc 0&qi-425828&cfql-0&dnb-0 .edu/d2)/lm
ID: 2817827 • Letter: Y
Question
y Bookmarks People Window Help 16&ispry&drc 0&qi-425828&cfql-0&dnb-0 .edu/d2)/lms/quizzing/userjattempt/quiz start frame.d2i7ou-6909168 YEESITY FIN 412 FA18 001-2 ent Classlist Discussions Assignments Grades Quizzes UA Tools Library Tools omework 6 Griffin Douglas: Attempt 1 Question 5 (0.13 points) Use the information below for Questions 5-8: Teer Co. is considering purchasing a piece of equipment costing $300,000. It has a useful life of 3 years and will be depreciated straight-line to zero, after which it will be scrapped for $20,000. This piece of equipment will save Teer Co. $125,000 per year in pretax operating costs during its useful life but requires an initial investment in NWC of $50,000. Teer Co. has a 20% tax rate and a required rate of return of 10%. What is the annual Operating Cash Flow (OCF) of this piece of equipment in Years 1-3? aved $170,000Explanation / Answer
The table below shows the Operating cash flow and IATCF
What is tha annual operating cash flow from year 1-3? Answer: 120,000
What is yewar 3 IACTF? Answer: 186,000
Year 0 1 2 3 Initial Investment -300000 Initial NWC -50000 Savings each year 125000 125000 125000 Depreciation -100000 -100000 -100000 Income before taxes 25000 25000 25000 Taxes at 20% -5000 -5000 -5000 Net Income 20000 20000 20000 Add back depreciation 100000 100000 100000 Operating cash flow (OCF) 120000 120000 120000 After tax salavage value 16000 Return of NWC 50000 IATCF 3rd year 186000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.