B. Estimated cost of the repairs C. Operating costs of the repaired asset D. Pla

Question

B. Estimated cost of the repairs C. Operating costs of the repaired asset D. Plan to capitalize the cost of the repairs for financial reporting pu Answer: D Question: 213 . A company buys a machine for $175,000. The machine will be depreciated on straight-line basis over a 10-year period with salvage value of $25,000. The company expects the machine to generate after-tax net cash inflows of $30,000 in each of the 10 years. At the end of the 10 years, the machine is expected to be sold for $25,000. The discount rate is eight percent. Present value of S1 for 10 years at 8% 0.463 6.71 Present value of an annuity of S1 for 10 years at 8% Visit us athttps://www.certsgrade.com/pdt/core

Explanation / Answer

Free Cash flow $30,000 Add : Depreciation (175000-25000)/10 15000 Free Cash flow $45,000 Present Value of Annuity 6.71 Present Value of cash flow $301,950 Present Value of Salvage (25000*0.463) 11575 Total present value of cash flow $313,525 Less : Cash outflow - Cost of Machinery ($175,000) Net Present Value $138,525

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