A New Heater Is Being Purchased for $250,000 That Will

question 73

Essay

A new heater is being purchased for $250,000 that will be used for 5 years.Depreciation will be straight line over 5 years.The heater will reduce overall costs by $70,000.The corporate tax rate is 40%.Determine the operating cash flows from the cost cutting activity.Use three different methods to calculate operating cash flows.

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Definitions:

Cross-hedging

An investment strategy used to manage risk by investing in assets indirectly related to the primary exposure.

Hedging

A risk management strategy used to limit or offset the probability of loss from fluctuations in the prices of commodities, currencies, or securities.

Closely Related

Closely Related describes items, individuals, or concepts that are closely connected in terms of characteristics, functions, or relationships.

Forward Contract

An agreement between two entities to purchase or sell a certain asset at a specified price and date in the future.