Register to reply

Cash flow and depreciation

by monsmatglad
Tags: cash, depreciation, flow
Share this thread:
monsmatglad
#1
Apr23-12, 09:02 AM
P: 50
24. You invest in a new machine costing 8,000 kroner. This machine is expected to
increase the firmís cash flow before tax with 2,500 kroner in years 1 and 2, and
thereafter 3,500 kroner in years 3 and 4. Assume that the annual depreciation is
30% of the book value in the beginning of each year, and that the machine in its
final year will be depreciated to zero. Salvage value beyond dismantling costs is
negligible. The corporate tax rate is 40%.
What is the net present value of this investment if the required rate of return is
10%?
(a) NOK -378
(b) NOK 147
(c) NOK 409
(d) NOK 934
(e) I choose not to answer.

my strategy would be to find the depreciation values for every year, and add the product of these and the tax rate; and then add this to the "after tax" cash flow. i would then use all the cash-flow units, take the capital cost and find the NPV of the product. this did not work...
could someone show me how to do this?

=)
Phys.Org News Partner Social sciences news on Phys.org
When rulers can't understand the ruled
When casualties increased, war coverage became more negative
People are attracted to the body odor of others with similar political beliefs
nitsuj
#2
Apr25-12, 03:33 PM
P: 1,102
what is the discount rate?


Register to reply

Related Discussions
Cash for kids Social Sciences 8
Depreciation Program in C++ with arrays Engineering, Comp Sci, & Technology Homework 3