show me detail steps Cash Flow Diagrams 2-52 On December 1, Al Smith purchased a

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show me detail steps

Cash Flow Diagrams 2-52 On December 1, Al Smith purchased a car for $18,500. He paid $5000 immediately and agreed to pay three additional payments of $6000 each (which includes principal and interest) at the end of 1, 2, and 3 years. Maintenance for the car is projected at $1000 at the end of the first year and $2000 at the end of each subsequent year. Al expects to sell the car at the end of the fourth year (after paying for the maintenance work) for $7000. Using these facts, prepare a table of cash flows.

Explanation / Answer

Note : negative sign means cash outflow

Year upfront capital EMI maintainance salvage cash flow Net Cash Flow 0 -5000 -5000 1 -6000 -1000 -7000 2 -6000 -2000 -8000 3 -6000 -2000 -8000 4 -2000 7000 5000

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